WeWork taking second run at IPO

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WeWork is taking another run at going public. The co-working pioneer has signed a merger agreement with BowX Acquisition Corp., a special purpose acquisition company, that will result in WeWork becoming a publicly listed company.

The transaction values WeWork at an initial enterprise value
of approximately $9 billion.

The deal will provide WeWork with approximately $1.3 billion of cash which will enable the company to fund its growth plans into the future. 

SANDEEP MATHRANI

Sandeep Mathrani, CEO of WeWork, said, “WeWork has spent the
past year transforming the business and refocusing its core, while
simultaneously managing and innovating through a historic downturn. As a
result, WeWork has emerged as the global leader in flexible space with a value
proposition that is stronger than ever. Having d the BowX team will be
invaluable to WeWork as we continue to define the future of work.”

Vivek Ranadivé, chairman and Co-CEO of BowX Acquisition
Corp., said, “I’m thrilled to partner with the entire WeWork team as they
continue to transform this business and the real estate industry at large.

“This company is primed to achieve profitability in the short-term,
but the added long-term opportunity for growth and innovation is what made
WeWork a perfect fit for BowX. With a fantastic core business, I see WeWork as
a company at an inflection point, with an incredible roster of key members
coupled with the vision and leadership to digitize an enormous industry.”

Mathrani and Marcelo Claure will continue to lead WeWork as CEO
and Executive Chairman, respectively, along with the rest of the company’s leadership
team. Following the closing, Vivek Ranadivé of BowX and Deven Parekh of Insight
Partners will join the company’s Board of Directors.

Since 2019, WeWork has been transforming its business
through expense management efforts, exits of non-core businesses, and material
portfolio optimization, which contributed to a dramatically improved cost
structure.

Over the course of 2020, WeWork improved its free cash flow
by $1.6 billion through cost cutting measures including reducing SG&A expenses
by $1.1 billion and trimming building operating expenses by $400 million. The
company also exited all of its non-core ventures and streamlined headcount by
67 percent from its peak in September 2019.

As of December 2020, the company successfully exited 106
pre-open or underperforming locations and executed over 100 lease amendments
for rent reductions, deferrals, or tenant improvement allowances resulting in
an estimated $4.0 billion reduction in future lease payments.

It now has 851 locations in 152 cities, totaling more than
one million workstations. Enterprise companies now make up more than 50 percent
of WeWork’s memberships, up from just 10 percent in 2015. Only 10 percent of
WeWork’s members have month-to-month commitments, while more than 50 percent
have commitments longer than 12 months, contributing to an average full
commitment term of well over 15 months.

2020 revenue, excluding China, was $3.2 billion, which is flat compared to 2019, even after exiting non-core businesses and despite significant headwinds from COVID-19.

VIVEK RANADIVE

The transaction will be funded with BowX’s $483 million of
cash in trust (assuming no redemptions from the trust account by public
investors of BowX) in addition to a fully committed $800 million private
placement investment at $10.00 per share led by leading investors including
Insight Partners, funds managed by Starwood Capital Group, Fidelity Management
& Research Company LLC, Centaurus Capital, and funds and accounts managed
by BlackRock.

Upon closing, it is expected that the company will have
approximately $1.9 billion of cash on the balance sheet and total liquidity of
$2.4 billion, including a $550 million senior secured notes facility to be
provided by SoftBank Group.

The transaction, which has been unanimously approved by the
Boards of Directors of WeWork and BowX, is expected to close by the third
quarter of 2021.

WeWork scrapped its original plan to go public in 2019 after
investors became wary of its business model and its value nosedived as then
CEO, founder Adam Neumann was ousted for his unconventional management style.

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