WeWork debuted on the New York Stock Exchange yesterday, more than two years after its original IPO attempt failed spectacularly amid reports of financial mismanagement and a cloud of scandal around founder and then-CEO Adam Neumann.
This time, WeWork hasn't taken the IPO route: instead, it merged with a special purpose acquisition company or SPAC, BowX Acquisition Corp. SPACs like BowX are single-purpose companies, existing for one reason: to provide a roundabout route for companies to list on the stock market without having to meet the usual regulatory requirements. The SPAC carries out its own IPO, and then it merges with the actual company, such that the resulting combined entity remains listed but now under the name of the actual company and with the actual company's assets.
The BowX merger valued WeWork at US$9 billion in March, a huge drop from its US$47 billion valuation back in January 2019 when SoftBank first invested in it. In fact, US$9 billion is already an improvement from a year ago. Allegations of self-dealing and insider trading, followed by SoftBank CEO Masayoshi Son's open admission that he had given up on the company, had taken its value to less than a third of that in early 2020.
With the new valuation, the company's shares were issued at US$10. When trading started on Thursday, WeWork's share price jumped over 10 percent to above US$11.
However, it's questionable whether the stock market will continue to believe in WeWork. In 2019, even before the pandemic started, WeWork was already downsizing and shedding jobs. When COVID-19 hit and millions of people moved to remote work, business models centred on commercial office space went downhill, and WeWork was no exception. It lost US$3.2 billion in 2020 and another US$2.1 billion just in the first quarter of 2021, according to one Financial Times report.
On the other hand, that loss dropped to US$923 million in the second quarter - still massive, but a sign that the company's attempts to cut its operating expenses are working, and WeWork CEO Sandeep Mathrani has been determinedly positive about the company's outlook going forward. Earlier this month, he told investors that WeWork is "the right company at the right time", referring to the shift towards flexible working that is slowly making the workspace-on-demand model relevant again as economies open up with a greater focus on giving employees flexibility.