WeWork Stock: The Shared Workspace Company Will Merge With a SPAC This Year
WeWork has since changed its leadership, cut back on expenses, and is ready to go public once again, this time through a special purpose acquisition company (SPAC) merger with BowX Acquisition Corp., which trades under the ticker symbol BOWX.
But some investors may still be skeptical of WeWork’s business model and question whether this prodigal company has truly left its spendthrift days behind.
What is WeWork?
WeWork is a real estate company that offers shared workspaces to companies and individuals.
Expected IPO Date:
Third Quarter of 2021
- The company recently announced that it will go public through a merger with BowX Acquisition Corp. (Nasdaq: BOWX), a special purpose acquisition company (SPAC).
- The deal values WeWork at $9 billion.
- Coworking and shared office spaces are becoming more mainstream, particularly as businesses emerge from the pandemic.
- WeWork has more than 850 locations around the globe, making it one of the leading office sharing companies.
- It's still unclear whether WeWork's business has truly turned a corner, or if investors should still worry about the company's long term financial outlook.
- The company will go public through a SPAC. These mergers don't always give investors a clear picture of a company's financial state.
Here’s everything you need to know about the coworking giant and its upcoming market debut.
10 Top WeWork Numbers to Know
- $3.5 billion: WeWork’s losses in 2019
- $9 billion: WeWork’s current valuation
- $47 billion: The company’s valuation in 2019
- $10 billion: How much SoftBank Group Corp. paid to take over WeWork
- 80%: The percentage of WeWork that Softbank owns
- 47%: The occupancy rate of WeWork’s offices at the end of 2020 (thanks to the coronavirus pandemic)
- $485 million: WeWork’s projected 2022 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA)
- 851: The number of WeWork locations worldwide
- $7 billion: Estimated revenue for WeWork in 2024
- $49 million: WeWork’s capital expenditures in 2020, down from $2.2 billion in 2019
Bull Case: Why Investors Should Consider Buying WeWork Stock
There’s no getting around it: Coworking is here to stay. Office-sharing and coworking may have seemed like something that only a handful of companies did a few years ago, but the global pandemic has likely changed all that.
Large technology companies like Facebook and Twitter have said that many of their employees will be able to work from anywhere, even after the pandemic is over. And many smaller companies have experienced some of the benefits, like lower rent costs, and are looking for smaller spaces to rent post-COVID.
A recent PwC report showed that a staggering 87% of company executives said that they expect to make changes to their real estate strategy over the next year.
And therein lies the opportunity for WeWork. The company’s flexible coworking and office-sharing services were already popular among many companies, but they could be even more in demand as companies emerge from the pandemic looking for new, and less rigid, ways of setting up office space.
WeWork is certainly counting on it. WeWork estimates that its workstations will reach an occupancy level of 90% by the end of 2022, up from 72% at its pre-pandemic level in early 2020.
Additionally, WeWork has drastically cut costs since its initial attempt at going public. Back in 2019 the New York-based company had about $47 billion in lease obligations and was burning through cash.
But the company has since trimmed much of its fat and says it will be profitable by the end of this year.
WeWork said in an investor presentation that it had exited 106 pre-open or underperforming locations, executed over 100 lease amendments for rent reductions, and took additional steps to reduce its future lease payments by $4 billion.
Additionally, the company has reduced its selling, general and administrative (SG&A) expenses by $1.1 billion and reduced its headcount by 67% in order to reduce costs.
At the same time, WeWork has also increased the amount of enterprise customers it has, from 10% of memberships in 2015 to more than 50%. And the majority of its members have lease commitments longer than 12 months, with just 10% of WeWork members using a month-to-month plan.
Bear Case: Why You Should Avoid WeWork Stock
If you’re unfamiliar with WeWork’s massive fall from grace in 2019, it’s worth a quick recap.
WeWork was all set to go public back in 2019 and filed the customary Form S-1 with the U.S. Securities and Exchange Commission (SEC). But when it did, potential investors saw some glaring problems.
The company’s then-CEO, Adam Neumann, was leasing property he owned back to his company. WeWork was spending lots of money on things it didn’t need—including a $60 million private jet—and the company piled up losses of $900 million in the first half of 2019, on $1.54 billion in sales.
The company’s S-1 revealed a real estate company losing tons of money, mismanaged by its CEO, holding expensive long-term leases, and in need of tons of cash to continue growing at its current rate.
To make matters worse, WeWork’s prospectus left many investors scratching their heads as financial data in the document kept being updated to fix errors, and the company failed to mention that Neumann was on the company’s compensation committee.
Not long after the botched IPO, WeWork removed Neumann as the company’s CEO and WeWork started a two-year journey of replacing leadership, cutting costs, and trying to rebuild its reputation.
The problem is that it’s still unclear whether or not WeWork has emerged as an entirely different company. SPAC mergers don’t require the same amount of strict financial guidelines as traditional IPOs, which means the financial estimates the company can make before going public could potentially be rosier than they’ll actually turn out to be.
That’s important because WeWork has reportedly said that it will generate $7 billion in revenue in 2024 (more than double 2020 sales), its workstation occupancy level will reach 90% in 2022 (while it only had occupancy of 72% before the pandemic), and that its EBITDA will be $485 million next year. This all may come true, or it may not, but investors need to know that these could be rough estimates.
Additionally, WeWork referred to itself as a “technology platform” in its investor presentation, much like it did in its original S-1 in 2019. To be clear, WeWork is not a technology company—it rents out office space.
The odd wording isn’t exactly a reason not to invest in the company, but the phrase is reminiscent of how WeWork fooled investors into thinking that it was a $47 billion tech company just two years ago.
When Can I Buy WeWork Stock?
WeWork will merge with BowX Acquisition Corp. this year and plans to close the deal in the third quarter of 2021.
The merger with BowX values WeWork at $9 billion, including debt, and the coworking company will also raise $1.3 billion in the deal through private investments.
WeWork said that upon closing it expects to have about $1.9 billion in cash.
The next blockbuster IPO?
2021 could be one of the biggest years for IPOs in stock market history. Yet, with just a small fraction of IPOs historically driving nearly all the profits, who will you trust to uncover the most innovative and high-upside IPOs in the coming months?
There’s a company that “called” these businesses long before they hit it big. They first recommended Netflix in 2004 at $1.85 per share, Amazon in 2002 at $15.31 per share, and Apple back in the iPod Shuffle era at $4.97 per share. Take a look where they are now.
That company: The Motley Fool.
For people ready to make investing part of their strategy for financial freedom, take a look at The Motley Fool’s flagship investing service, Stock Advisor. They just announced their top 10 “best buys now” across the entire stock market. Whether you’re starting with $100, $500, or more, you should check out the full details.
What Is WeWork’s Stock Symbol?
With a definitive merger agreement in hand with BowX Acquisition Corp., you can effectively own WeWork when acquiring shares of BOWX. After the merger announcement, shares of BOWX rose from $9.47 (prior to the announcement) to $11.71 at the close of its next trading date.
Once the merger is completed, BOWX will likely change its ticker symbol to something similar to WeWork’s name.
WeWork Stock: Who Owns It Now?
SoftBank is WeWork’s largest investor and owns the majority of the real estate company. When WeWork’s 2019 IPO failed, SoftBank poured more money into the coworking company and now owns about 80% of WeWork.
SoftBank, which was founded by the Japanese billionaire Masayoshi Son, has invested more than $15 billion into WeWork and apparently has some regrets about its decision to do so. Masayoshi Son said in 2020, “We made a failure on investing in WeWork and I’ve been admitting that several times I was foolish.”
WeWork has received a total of $20.6 billion in investments, according to data from CrunchBase.
WeWork Stock Chart: How Much Is It Worth Now?
WeWork has agreed to go public through the SPAC BowX Acquisition Corp. at a valuation of $9 billion.
This a drastically reduced valuation than WeWork had in 2019 when it originally planned to go public at a $47 billion valuation.
But even with its valuation decrease, it’s still three times higher than what SoftBank valued WeWork at just last year.
Here’s a quick look at WeWork’s rollercoaster valuation over the past few years:
What Is WeWork’s Share Price?
Until its merger agreement with BOWX is complete, the share price of WeWork will be reflected by what BOWX is trading at.
Once the merger completes, WeWork will likely choose a new ticker symbol. The day after its merger announcement, BOWX shares traded for $11.71.
Should You Buy WeWork Stock?
WeWork appears to have made some significant strides since it last planned to go public in 2019. The company is leaner than it was before and it’s no longer under the leadership of its eccentric former CEO Adam Neumann.
Under its turnaround plan, the company closed 100 locations, cut spending, and narrowed its losses.
Additionally, the company is tapping into a potentially large coworking market. Shared offices could experience a boom when the pandemic has subsided as companies large and small create hybrid work solutions for their employees and the work-from-home trend accelerates.
At its core, WeWork’s business of creating a desirable work environment in a shared office is a good idea. And it can be argued that no other real estate company has been able to create a coworking community in quite the same way as WeWork has.
But is WeWork a good investment idea right now? I don’t think so. WeWork is under new management and doesn’t appear to be the overvalued, big-spending company that it was just two years ago. But that doesn’t mean it’s worth an investment.
For one, investors don’t have a clear picture of WeWork’s financials yet. When companies go public through SPAC mergers, they don’t need to disclose the same amount of financial information as they would if they were having an initial public offering.
SPACs are volatile investments on their own, and when you add WeWork’s tumultuous past into the equation, this company’s potential public debut looks like one to observe from the sidelines.
At the very least, investors should wait a few quarters after the company goes public and after it has reported detailed financial information in its quarterly updates before they invest in the company.
Frequently Asked Questions
Why Did WeWork’s Original IPO Fail?
When WeWork released its regulatory S-1 filing in 2019, it failed to correctly state some basic information—like how many new workstations it had filled in the first half of the year—left out information about its corporate governance, and didn’t disclose that its CEO was on the board’s compensation committee.
After WeWork’s financials and its management were called into question, the company canceled its IPO and its board removed Adam Neumann as CEO a few weeks later.
Is WeWork Publicly Traded?
No, WeWork isn’t publicly traded right now. But the company has agreed to merge with BowX Acquisition Corp., a special purpose acquisition company (SPAC), in the third quarter of 2021. By purchasing shares of BOWX, you can effectively own WeWork before its merger completes.