More than two years after its failed IPO, WeWork will begin trading publicly on the New York Stock Exchange on Thursday, after merging with a special purpose acquisition company.
The office-leasing company scrapped plans for an IPO in 2019 after investors raised concerns over its business model and corporate governance and its founder and then-CEO Adam Neumann.
Plans for the merger with BowX Acquisition Corp. were first announced in March, in a deal that reportedly valued the company at roughly $9 billion.
The valuation is a sharp drop from 2019, when WeWork was initially valued at a steep $47 billion by SoftBank Group. Its valuation slowly lowered as news of the company’s finances unraveled and investor demand wained.
“You’ve said this is a story with drama,” WeWork Executive Chairman Marcelo Claure told CNBC’s “Squawk Box” on Thursday. “Sure, this is a story where a lot of people wrote documentaries that it was the end of WeWork. Well the resistance, the persistence of these people is incredible. This company is here, is stronger than ever, and no doubt that we’re going to be celebrating many more milestones.”
What went wrong
WeWork’s troubles began in August 2019, when the company’s IPO filing revealed it had lost $1.9 billion the previous year and was on track to run through remaining cash. A crippling report from The Wall Street Journal in September raised concerns over how Neumann managed the company, including possible illegal activities.
Neumann stepped down as CEO that month. CNBC reported in October that he would get a package worth up to $1.7 billion to walk away from WeWork and give up his voting rights. Real estate executive Sandeep Mathrani later assumed the CEO role.
“WeWork is an amazing brand and if someone gives you a super brand to turn around, you’re going to have to say yes,” Mathrani told CNBC’s “Squawk Box.”
After the failed IPO, WeWork’s troubles continued. That November, Reuters reported the New York State Attorney General was investigating the company, including whether Neumann engaged in self-dealing to enrich himself.
That included reports that Neumann purchased the trademark for the word “We,” and planned to charge WeWork $6 million to transfer it. Self-dealing is when someone acts in their own best interest rather than their clients.
Bloomberg also reported that month that WeWork was facing scrutiny from the U.S. Securities and Exchange Commission over its disclosures to investors in the run-up to its failed IPO.
The failed IPO and onslaught of the pandemic led to several rounds of layoffs at the company in late 2019 and 2020. WeWork also suffered massive losses as Covid-19 shuttered office spaces worldwide.
Claure told Squawk Box that everybody has “an important role to play” and that Neumann deserves credit as the visionary who came up with the idea.
SoftBank takeover
SoftBank made its first multi-billion dollar investment in WeWork in 2017 through its $100 billion Vision Fund, which has also funded Silicon Valley startups…
Read More: WeWork goes public through SPAC