After a long time since its block buster initial public offering (IPO) in the United States was jeopardized by a row over its market valuation, the US based workspace sharing firm WeWork will now be attempting to go public again – this time through the route of a merger with blank-check firm BowX Acquisition Corp.
The office sharing startup said on Friday that the deal for the IPO will be valued at $9 billion.
That is a huge drop in its valuation compared to the $47 billion that it was valued at for a listing in 2019, prior of a botched listing plan that had to be cancelled by the company after concerns were expressed by investors about the business model of the company as well as the management style of the country founder Adam Neumann.
At that time, the potential valuation of the company was even set as high as $65 billion by Goldman Sachs bankers. However the market valuation of the company instead dropped to just about $8 billion after one of its biggest investor – Japanese investment firm SoftBank Group Corp was forced to extend a life-saving financing investment in the company.
In a communication with the prospective investors, the startup informed that it had made a loss of about $3.2 billion last year. That communication was a part of a pitch for a stock market listing by merging with a special purpose acquisition company (SPAC), according ot reports quoting sources with knowledge of the matter.
According to reports, $1.3 billion in cash from the latest deal will be made available to WeWork which would include $800 million in private investment from Insight Partners, funds managed by Starwood Capital Group, Fidelity Management and others.
A SPAC is a shell company that uses proceeds from a public listing to buy a private firm. In recent years this route of public listing has gained popularity among companies planning to go public and WeWork is the latest firm in a string of high-profile companies that have chosen to use this method to get listed,.
SPAC mergers over traditional IPOs were also chosen as their preferred methods to go public by Tesla Inc’s rival Lucid Motors and Richard Branson-led Virgin Galactic Holdings Inc.
In recent reports, there are negotiations being held by Southeast Asia’s ride-hailing and food delivery giant Grab Holdings for getting itself listed in the United States through a mega-merger which would give it a valuation of $40 billion.
BowX Acquisition raised $420 million in its IPO in August last year.
(Adapted from ChannelNewsAsia.com)