Adam Neumann’s final WeWork act: helping SoftBank’s SPAC deal – ET RealEstate

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BOSTON | BENGALURU: An unlikely figure helped set the spark for SoftBank Group Corp’s $9 billion deal to take WeWork public.

Adam Neumann, WeWork’s co-founder and ousted chief executive, met in November with the head of the special purpose acquisition company (SPAC) that would go on to clinch a deal with WeWork, according to people familiar with the matter.

Neumann was locked in a fierce legal battle at the time with SoftBank over a $3 billion deal for a portion of his and other investors’ stake in the office space-sharing company.

The introduction between Neumann and BowX Acquisition Corp co-chief executive Vivek Ranadive over a Zoom call was facilitated by a senior UBS Group AG capital markets banker, the sources said. It preceded discussions the SPAC chief had with WeWork.

Neumann played up WeWork’s prospects on the call and the conversation piqued Ranadive’s interest, the sources said.

Ranadive’s SPAC had been looking for an acquisition target after raising $420 million in an IPO in August.

The ensuing deal announced on Friday cushions some of the blow SoftBank has suffered with its investment in WeWork. It has invested at least $18.5 billion in WeWork since 2017, including $6 billion when a fundraising round valued the startup at $47 billion in January 2019.

The sources described the meeting between Neumann and Ranadive on condition of anonymity. Representatives for Neumann, WeWork, UBS and SoftBank declined to comment. Ranadive did not respond to multiple requests for comment.

Neumann, who has kept a low profile since his unceremonious ouster after WeWork’s failed IPO attempt in 2019, has had a contentious relationship with SoftBank.

The Japanese tech investment giant pushed for his ouster before it took over WeWork in a $10 billion rescue financing deal in October 2019. It later backtracked on an agreement to buy $3 billion of WeWork shares from Neumann and other investors, citing criminal and civil investigations into WeWork, the company’s failure to restructure a joint venture in China, and the shift to remote work due to the COVID-19 outbreak.

One week before the case was due to go to trial, SoftBank reached a settlement with Neumann and other investors in February to pay out about half of its original commitment. It did not want the potential legal liability to jeopardize the SPAC deal, the sources said.

Neumann also stands to benefit from the SPAC deal as he still has a roughly 10% stake in WeWork, worth around $790 million.

Limited options

Neumann had no role in the SPAC deal after his discussion with Ranadive, the sources said. Ranadive and his team began discussions with WeWork in December. SoftBank Chief Operating Officer and WeWork Executive Chairman Marcelo Claure led the negotiations on behalf of SoftBank, with SoftBank CEO Masayoshi Son also stepping in, one of the sources said.

WeWork was apprehensive about opting for a traditional IPO following its failed attempt in 2019, and its options for a SPAC deal were limited. BowX was the only SPAC that expressed a serious interest in WeWork, two of the sources said.

Ranadive, a 63-year-old technology executive turned investor and owner of the Sacramento Kings basketball team, said last week WeWork stood to benefit from a shift by many companies to a hybrid model of working that calls for employees to come in to a workplace just a few days a month.

He called the shift a tailwind for WeWork.

The deal was received well by Wall Street, with BowX shares ending trade on Friday up 20% following the merger’s announcement.

WeWork’s valuation was revised down in the final stages of the negotiations. Investors participating in the private investment in public equity (PIPE) transaction managed to drive down WeWork’s valuation in the agreement from $9.9 billion to $9 billion, including debt, the sources said. The size of the PIPE increased to $800 million from $500 million.

Ranadive and the rest of the BowX senior team will receive WeWork shares worth almost $90 million after investing $11.7 million of their own money. They will be restricted from selling these shares for the first year unless certain share price targets are met.



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WeWork takes SPAC route to go public in $9 billion deal – ET RealEstate

BENGALURU | BOSTON | NEW YORK: WeWork said on Friday it has agreed to go public through a merger with blank-check firm BowX Acquisition Corp, enabling the office-sharing company to complete a stock market listing two years after its failed first attempt.

The merger with BowX, a special purpose acquisition company (SPAC), values WeWork at around $9 billion, a steep drop from the $47 billion the money-losing company was worth in a 2019 private funding round led by Japanese conglomerate SoftBank Group Corp.

Later in 2019, WeWork attempted an initial public offering but pulled the plans due to investor concerns over its business model and co-founder Adam Neumann’s management style.

Neumann ultimately stepped down as chief executive. Sandeep Mathrani is now CEO, and his work has included cutting costs by $1.6 billion, according to WeWork.

“Sometimes you don’t pick the path (and) a path picks you. In December, we were approached by BowX and other SPACS,” Mathrani told CNBC in an interview.

“We had seen a path to profitability and we thought it was a good time to raise additional liquidity to de-risk the balance sheet, and to make sure that we have a path to profitability,” Mathrani added.

BowX shares on Nasdaq were up 8% in morning trading.

SoftBank, WeWork’s largest backer, will retain a majority stake in the company after the deal. SoftBank and other investors have agreed to a one-year lock-up on their shares, according to a person familiar with the matter. Current shareholders will own about 83% of the combined company.

SPACs like BowX are shell companies that raise funds in an IPO with the goal of merging with an unidentified private company. For the company being acquired, the merger is an alternative way to go public over a traditional IPO.

‘Opportunity stock’

Prospective investors in WeWork’s 2019 IPO were in part spooked by losses that stretched into the billions of dollars with no clear path to profitability.

WeWork has yet to turn a profit. Its adjusted EBITDA, a measure of a business’ underlying profitability, was -$1.8 billion in 2020. WeWork forecasts this will be -$900 million in 2021 but predicts it will achieve operating profitability of $500 million in 2022.

WeWork has also had to weather the COVID-19 pandemic, which led to many office staffers working from home. WeWork’s revenues for 2020 were flat at $3.2 billion, but the company and real estate industry experts expect there will be growing demand after the pandemic for the sort of flexible offices provided by companies like WeWork.

“We believe that WeWork is going to be the opportunity stock for the recovery,” BowX co-CEO Vivek Ranadive told CNBC.

In total WeWork expects to raise $1.3 billion in cash from the merger, funded by the $420 million BowX raised in its IPO in August and an $800 billion private investment in public equity (PIPE) from investors including Insight Partners, Starwood Capital Group and Fidelity Management.

BowX had initially looked to raise $500 million for the PIPE but increased this due to investor demand, according to people familiar with the matter.

PJT Partners was WeWork’s financial adviser on the deal. UBS Group AG advised BowX.



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