WeWork shares rise on first day of trading two years after failed IPO

The shared-office company went public through a combination of Boex Acquisition Corp., a special purpose acquisition company. The stock rose 10.8% to $11.50 on Thursday afternoon.

In 2019, WeWork’s IPO broke as the company faced questions about its corporate governance and how much it was worth. The institution which is now making its debut on the New York Stock Exchange has started afresh under the leadership of Chief Executive Sandeep Mathrani. It closed places, renegotiated leases and cut thousands of jobs to reduce expenses during the Covid-19 pandemic.

The deal with the BowX acquisition earlier this year gave WeWork an equity value of about $8 billion. The companies said the combination provides WeWork with approximately $1.3 billion in cash proceeds.

SPACs, also known as blank-check companies as they raise funds in search of the goal of merging and going public, have grown in popularity as companies seek alternatives to traditional IPOs. Share prices for listed SPACs have retreated this year, with many blank-check companies trading below their first prices.

Founded in 2010, WeWork is a player in the market for flexible office space. It signs long-term leases with landlords, and after refurbishing a space and furnishing it, the company sells small offices or even entire buildings to tenants for as little as a month at a time. Rents low.

The company had a valuation of $47 billion in the lead-up to its IPO, but its attempt to tap into the public markets in 2019 failed when investors dismissed the money-losing company. Its visionary but precarious leader, Mr. Newman, later resigned as chief executive, telling employees in an email at the time that “I’ve been given too much attention.”

SoftBank Group Corp., the Japanese technology investor that has poured money into WeWork, rescued the company after a failed IPO attempt. It remains a majority stake in WeWork even after the SPAC deal. According to a securities filing, Mr. Newman will have about 11% of the voting power after the business combination.

Security filings from May to February WeWork awarded Mr. Newman an enhanced stock value of more than $200 million, a benefit that was not passed on to other early shareholders. As The Wall Street Journal reports, the deal was part of the former chief executive’s re-negotiations on a 2019 exit package meant to end a long-running dispute between him and SoftBank and create a public outcry for WeWork. This was to help clear the way for the listing.

In 2019, WeWork said its mission was to “raise the consciousness of the world” and that it could reduce costs by up to 66% compared to a standard lease. In its latest attempt to enter the public markets, WeWork released a slideshow for investors that included a case study of how companies could reduce real estate costs per employee by nearly 25% by switching to WeWork. Huh.

Prior to his foray into the public market, Mr. Mathrani marketed the company’s offering as the so-called Location as a Service. “As companies around the world re-imagine their workplaces, WeWork is uniquely positioned,” he said on Wednesday.

The Covid-19 pandemic struck the same way as WeWork was trying to recover from its troubles in late 2019, a challenge for a company that had workers in close proximity to shared offices. The company reported a net loss of $888.8 million in August for the three months ended June 30, compared to a loss of $863.8 million a year earlier.

In a securities filing, WeWork said its occupancy rate fell to 55% as of June 1, from 58% in the same period last year, mainly because of a decline in demand driven by the effects of Covid-19.

WeWork expects to be profitable next year after fixing its cost structure during the pandemic, Mr Mathrani said in a televised program on Thursday.

The company said Mr Mathrani and Executive Chairman Marcelo Claure, who is also SoftBank Group’s chief operating officer, will remain at the helm of WeWork as it goes public.

SoftBank’s billionaire founder Masayoshi Son has said he made the wrong decision to invest in WeWork. “We failed to invest in WeWork,” Mr. Son said last year. “I was a fool.”

On Thursday, Mr. Claire said Mr. is now “very excited.”

“It was a mistake in the way we executed the investment. Now, it’s our job to make sure it becomes another investment that generates the right returns for SoftBank,” Mr. Clare said on CNBC.