WeWork has announced losses of more than $3.2bn over the last financial year.
According to documents shown to prospective investors by the American office-sharing tech start-up, losses have decreased from $3.5bn in 2019.
The company still plans to go public at a valuation of more than $9bn this year.
The IPO will include debt through a merger with a special purpose acquisition company (SPAC).
What is a SPAC? Find out here.
According to reports in the States, BowX Acquisition Corp are the SPAC who will be investing in WeWork.
BowX is known as a ‘blank cheque firm’ that raised $420m in August to facilitate a SPAC merger and is managed by Vivek Ranadive, the founder of California-based tech giant Tibco.
The firm counts former NBA star Shaquille O’Neal as a financial adviser.
Softbank seeking to recoup some of its WeWork investment
Professor John Colley, Associate Dean of Warwick Business School, spoke to Business Leader about what is next for Softbank.
Softbank’s latest attempt to recoup some of its $20Bn investment in the perpetual loss maker WeWork looks like being in the form of a SPAC, or ‘blank cheque’ vehicle. The SPAC would go through an IPO then buy WeWork at around $9Bn.
WeWork is showing no signs of staunching its losses, which totalled $3.2Bn last year from an even bigger number the previous year.
The likely surplus of cheap office space once Covid recedes suggests that WeWork’s long leases may no longer be competitive. If WeWork really is worth $9Bn then there will be plenty of other entries to the short term rental office space.
SPACs are carefully structured with warrants to favour early investors at the expense of later investors. SPACs are very much vehicles to get rich fast in frothy markets and are unlikely to make good long term investments.
In many ways WeWork has been a symbol of investor fashion, badged initially as ‘tech’ to exploit the liquidity and high valuations in that sector and now as a SPAC which avoids some of the governance and controls needed for an IPO, after its previous unfortunate experience. SoftBank know that there will never be a better time to exit with something.