Peter Eavis and Lauren Hirsch wrote an article for the New York Times titled After Failed I.P.O., WeWork Will Go Public Through a Merger.
« The company announced on Friday that it had agreed to merge with a blank-check firm in a deal that would give it a listing on the stock market it was denied when it was forced to shelve an initial public offering as investors questioned its financial strength and dubious governance practices. »
« Instead of a traditional I.P.O., WeWork is merging with BowX Acquisition, a company listed on the stock exchange for the sole purpose of buying a business, in a type of deal that has become hugely popular in recent months. Investors, bankers, and even celebrities and athletes have rushed to float such special purpose acquisition companies, or SPACs, because they offer their creators a chance to mint huge profits relatively quickly. And merging with these vehicles is attractive to companies like WeWork because they provide an express lane onto the stock market without the obstacles that scuttled WeWork’s public offering in September 2019. »
« “There have been doubts raised about its business model, and those doubts may be difficult to address in an I.P.O. roadshow,” said Michael Klausner, a Stanford business professor, referring to the presentations that companies give to mutual funds, pension mangers and other institutional investors before a public offering. SPACs are “highly problematic” because their structure can encourage buyers to overpay, hurting shareholders in return, he said. »
« As of Wednesday, 295 SPACs had gone public in 2021, raising $93 billion and breaking last year’s record in a matter of months. Because so many of these companies are now out there, some have tried to use star power to get businesses to entertain their merger offers. BowX has its own star connections. It is backed by Bow Capital, an investment firm that counts Shaquille O’Neal, the former basketball player, as an adviser. »
« One of WeWork’s most vocal critics, Scott Galloway, a professor at New York University’s Stern School of Business, is now less skeptical about the company, in part because of its much lower valuation. “This now looks more like a growth company, as opposed to a psychotropic trip where the market enters into a consensual hallucination with a start-up,” he said. “This now looks just as good — or bad — as most SPACs.” »