After Failed IPO Disaster, WeWork Hopes To Ride SPAC Wave To Public Offering

After Failed IPO Disaster, WeWork Hopes To Ride SPAC Wave To Public Offering

If this week’s insanity surrounding Game Stop, AMC and a handful of other heavily shorted names wasn’t enough of a hint that something was very, very wrong in contemporary markets, well…

….Nearly 18 months after WeWork‘s long-anticipated IPO blew up in CEO Adam Neumann’s face, forcing him to abandon his executive role as WeWork’s CEO before turning around and suing many of the backers, including SoftBank’s Masayoshi Son.

This isn’t the first we’ve heard about WeWork possibly pursuing a SPAC. The company was reportedly exploring the possibility of hopping on SPAC train late last year.

With hundreds of investors scrambling for the next big-time SPAC deal target, it appears WeWork has caught their eye

WeWork is in talks to combine with a special-purpose acquisition company, according to people familiar with the matter, a deal that would usher the office-leasing company into the public markets more than a year after its high-profile failure to stage a traditional initial public offering.

WeWork’s board and its Chief Executive Sandeep Mathrani have been weighing offers from a SPAC affiliated with Bow Capital Management LLC and at least one other unidentified acquisition vehicle for several weeks, the people said. A deal could value WeWork at some $10 billion, some of the people said. It couldn’t be learned whether that includes debt.

The company also has received separate offers for a new private investment round, and it may well take that route instead, one of the people said. If it were to do so, WeWork would stay private and use the money to support its growth initiatives.

The talks are complicated and there is no guarantee WeWork will end up striking any dealsoon, the people cautioned.

SPAC’s have been around for decades. The first special-purpose acquisition company was created in 1993 by investment banker David Nussbaum and lawyer David Miller. Otherwise known as “blank check companies”, SPACs had a pretty shady reputation (partly due to their former name, “blind pools”) through the 1980s, 1990s and 2000s, until changes in SEC rules made it easier for investors to get their money back before a deal went through.

Still, some investors are worried about whether SPACs are in the midst of a bubble since: “When you have everybody talking about SPACs, it raises the issue as to whether or not there is an element of speculative mania,” said Roy Behren, managing member at Westchester Capital Management and a SPAC investor. Former SEC chairman Jay Clayton said last year that the agency is examining how blank-check company creators disclose their ownership and how any of their compensation is tied to an acquisition. Clayton’s successor, Gary Gensler, a former CTFC head under Obama, has a reputation as a much more stringent regulator.

The average time required for a SPAC to drum up a deal dropped from 17 months in 2018 to five in 2020, and many lately have needed less than that. All of this has resulted in roughly 250 deals being struck in the US alone last year, with 2021 already on track to eclipse the prior year.

Infographic: SPAC Boom in the U.S. | Statista

You will find more infographics at Statista

It’s this immediacy that has helped inspire their popularity, since the dealmakers bringing SPACs to market face fewer obstacles, which of course creates more risk for investors. Still, Wall Street is launching a third exchange-traded fund that invests in SPACs, accelerating the rush to cash in on investors’ enthusiasm for so-called blank-check firms. What’s more, SPACs appear to be open to all, fromCNBC regulars like Chamath Palihapitiya and celebrities like Shaq. 

While some of these deals will undoubtedly succeed, investors are facing steep odds. We wonder: Will the same traders who lambasted WeWork’s S-1, where management promised to “elevate the world’s consciousness” change their minds and buy in this time around? Or will the backers of the WeWork SPAC become the first in the US (at least, since the latest SPAC craze began) to ignominiously return capital raised to investors, as Wall Street once again shows that there’s only so much outrageous deals that it can tolerate.

Tyler Durden
Thu, 01/28/2021 – 17:50

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