Co-working space giant WeWork is the latest real estate firm to join the special purpose acquisition company merger craze.
The company revealed this week that it’s planning to merge with BowX Acquisition Corp., which is a SPAC company formed by the management of venture capital fund Bow Capital. Once that merger is complete, WeWork will go public. The deal has been valued at around $9 billion, CNBC reported, and will provide WeWork with around $1.3 billion in cash to fuel its next growth stage.
SPACs, often known as “blank check” companies, are publicly traded entities that are formed with the specific intention of buying an existing startup so as to take it public. It provides companies with an alternative route to the public markets than the traditional initial public offering, and is much faster and less risky.
The popularity of SPACs has jumped in the last couple of years. In 2021, SPAC IPOs have raised a total of $96.7 billion so far, up from $83.3 billion in 2020. In contrast, SPAC IPOs raised a combined $13.6 billion in 2019, illustrating how fast the industry has grown.
SPAC mergers have proven to be especially popular in the real estate industry, with i-Buying company Opendoor, the virtual staging company Matterport and proptech firms such as Latch, a keyless entry startup, and Knock, which offers a home selling platform, all going public that way or announcing plans to do so.
“You’re seeing a lot of proptech SPACs created by real estate people,” said Zach Aarons, CEO of MetaProp, in an interview with Commercial Property Executive. “You’re also seeing general SPACs buying proptech companies.”
This is the second time WeWork has attempted to go public. Back in August 2019 the company filed plans for a traditional IPO, but its offering quickly came under intense scrutiny from both investors and the media. There were big concerns about the company’s path to profitability, and its former CEO and co-founder Adam Neumann attracted a lot of criticism for antics such as smoking weed on a private jet, serving employees tequila shots after discussing layoffs and trademarking the term “We” then forcing WeWork to buy it for $5.9 million.
WeWork’s IPO filing also revealed that the company had lost billions of dollars, was burdened with an enormous collection of office leases, and had plans to continue its aggressive spending. And in addition to its losses, the paperwork also showed that WeWork loaned $7 million to Neumann and other executives. The company was also criticized for a lack of diversity with the absence of any women on its 7-person board of directors.
WeWork end up canceling its IPO just one month later, in September 2019, and Neumann then stepped down from his role as CEO shortly after.
WeWork was later taken over by its biggest investor SoftBank, and it has since set about steadying the company’s ship. It currently manage 859 office locations in 152 cities worldwide, and even though its business has suffered due to the COVID-19 pandemic, experts say the company is poised for a strong rebound as people look to get back to work once they are vaccinated.