I assume that by now everyone is very familiar with the history of WeWork and Adam Neumann. But just to refresh our memories, here’s a really quick recap:
Founded in 2010, CEO Adam Neumann oversaw the office rental office when it raised $ 11 billion in venture capital and experienced one of the most disastrous and steep falls in the company’s history. Adam was ousted from the company in late 2019 after WeWork’s aborted IPO.
Technically, WeWork used more than the $ 11 billion it raised from VC funds. After falling out of favor, WeWork’s largest investor, SoftBank, added an additional $ 5 billion to keep the company afloat, refinance debt and fund $ 700 million payouts to Neumann. So that’s $ 16 billion in total money that has been injected / invested.
WeWork’s largest pre-faceplant private valuation was $ 47 billion. This rating was achieved after a financing round that was completed in early 2019. Shortly after Adam stepped down in late 2019, WeWork’s valuation had dropped to $ 8 billion. So, at this point in time, it’s very convenient to say that WeWork raised $ 16 billion to start a $ 8 billion company.
Many very clever people predicted that COVID would inflict the final death blow on WeWork, but amazingly, it did not! WeWork may even have benefited as companies stopped wanting expensive long-term office rentals and instead looked for short-term flexible options. At its peak in 2019, WeWork’s utilization was 85%. At its lowest point in 2020, that rate dropped to 45%. Today the utilization is a little more than 60%.
Fast forward to the present and believe it or not, WeWork is finally going to be a public company sometime this week! Maybe even if you read this article.
Yesterday, the shareholders of a publicly traded company called BowX agreed to a deal that essentially merges with WeWork. This merger makes WeWork a public company after some Wall Street magic. This is the so-called IPO by a “SPAC” (“Special Purpose Acquisition Company”).
A SPAC is an empty shell company that goes public with no assets or business of its own. It goes out to the public to raise a ton of money and then has a limited amount of time to use that money to purchase an actual business that has assets and a business.
The SPAC is just a hungry hungry hippopotamus on the hunt for a snack. The SPAC devours the snack and in the end the snack becomes the SPAC. Say that five times quickly….
BowX Acquisition Corp went public a year ago. Its market capitalization is currently $ 627 million, thanks to a current price per share of $ 10.38. After months of planning, BowX shareholders approved the company’s plan to SPAC with what was left of WeWork on Tuesday. The deal will reportedly give WeWork around $ 1.3 billion in cash.
When all is said and done, BowX will change its ticker symbol to “WE”. WeWork’s market capitalization is expected to be $ 9 billion.
$ 9 billion is better than the $ 8 billion WeWork was worth in late 2019, but it’s still a long way from the $ 47 billion valuation it hit as a private company during its heyday. And it’s a universe away from the $ 80-100 billion that WeWork thought would eventually be worth it when it went public.
And what about the former CEO Adam Neumann?
As part of this SPAC plan, Adam received a $ 245 million “sweetener” from BOWX.
If the transaction is successful and the share price remains above $ 12 after the merger, Adam will be granted shares valued at $ 245 million at a price of $ zero per share. AKA, a free $ 245 million.
As mentioned, BowX’s stock price as of the time I write this article is $ 10.38. Keep an eye on the markets as the company flips the switch and switches from BowX to We to see if Adam’s $ 245 million sweetener is activated.
But that’s not all…
Adam will own around 8% of the new public version of WeWork, technically he will own 48 million shares. Assuming the company maintains a market cap of $ 9 billion, its 8% stake is worth $ 720 million. Between the $ 700 million in payouts he’s already received, his $ 720 million stake in the newly listed company, and other assets … Adam Neumann is back with a net worth of $ 1.5 billion in billionaire status.