Business

A Year After Pandemic Cleared Out Offices, WeWork Is Back | Business News

By MICHELLE CHAPMAN and KELVIN CHAN, AP Business Writers

After a year in which a global pandemic turned offices across the world into ghost towns WeWork, the embattled communal office-space company, is making a second attempt at going public.

The announcement Friday comes almost two years after WeWork’s first attempt at becoming a publicly traded company blew up in spectacular fashion, its founder and CEO ousted abruptly.

This time the New York company becomes part of the SPAC wave and will seek a listing after merging with the special-purpose acquisition company BowX Acquisition.

The agreement values WeWork at $9 billion plus debt, far below the $47 billion valuation given the venture in September 2019 when the IPO imploded after massive losses were revealed in regulatory filings.

WeWork said it would also raise $1.3 billion.

The deal with BowX provides a lifeline to WeWork. Armed with cash raised from investors, SPACs look for privately held companies to buy so that the company can easily list its stock on an exchange. And the volume of companies going public through SPACS has exploded.

Last year, SPACs raised $83.4 billion, more than six times the prior year. They surpassed that level in less than three months this year.

WeWork said during a call with industry analysts Friday that it anticipates strong growth as the economy recovers. The company is forecasting 1.5 million total memberships at some point in 2024. That compares with 2020’s 476,000 memberships. Revenue, excluding China, is predicted to climb to $7 billion, more than double last year.

WeWork leases buildings and divides them into office spaces to sublet to members, which include small businesses, start-ups and freelancers who want to avoid laying out funds for permanent office space. The company’s operating expenses were exorbitant and it became reliant on repeated cash infusions from private investors.

CEO and founder Adam Neumann, known as much for his erratic behavior as for his innovative vision, was pushed aside. He used some of his WeWork stock to secure a $500 million personal loan prior to the IPO. He also drew criticism after The We Company — WeWork’s renamed parent — paid him nearly $6 million for the trademark “We.” He returned the money following a backlash.

“WeWork has spent the past year transforming the business and refocusing its core, while simultaneously managing and innovating through a historic downturn,” Sandeep Mathrani, who took over as CEO after Neumann’s ouster, said in a prepared statement. “As a result, WeWork has emerged as the global leader in flexible space with a value proposition that is stronger than ever.”

Neumann co-founded WeWork in 2010 with one shared office in Manhattan. It now has 851 locations in 152 cities around the world.

Over the past year, the company has worked to cut costs and shed non-essential ventures. It also reduced its workforce by 67% from its peak in September 2019 as the pandemic spread. WeWork has since focused on landing more longer membership commitments. Only 10% of its members have month-to-month commitments today, while more than 50% have commitments longer than a year.

The pandemic and the rapid economic recovery anticipated by most economists have put WeWork in an even better position than in 2019, when it was one of the most talked-about companies on Wall Street, according to commercial property experts.

To begin, there’s the typical post-recession surge in new businesses set up by people who lost their jobs, and “the obvious place to start your business nowadays is in a serviced office,” said Mat Oakley, head of U.K. and European commercial research at Savills. There’s also the considerable uncertainty around how existing businesses are going to return to the office, combined with employers who find they now need to satisfy their staff’s desire to “work in a more agile fashion,” he said.

Oakley said that while leasing volumes are still low, inquiries for serviced office space have been rising since the start of the year.

“There could be a reasonably optimistic story for serviced office providers going forward,” Oakley said.

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