WeWork listing sees value reduced from $47 billion to $9 billion

NEW YORK, New York: Two years after its failed attempt, WeWork finally completed a stock market listing, following its decision to go public through a merger with BowX Acquisition Corp, a special purpose acquisition company (SPAC), valuing the office-sharing company at some $9 billion.

This is a sharp decline from the $47 billion the company was worth after a private funding round in 2019, led by Japanese conglomerate SoftBank Group Corp, the company's largest backer, which will retain a majority stake.

SoftBank and other investors have agreed to a one-year lock-up on their shares, sources said. The current shareholders will own some 83 percent of the combined company.

WeWork had attempted an initial public offering in late 2019, but had to cancel its plans following investor concerns over its business model, co-founder Adam Neumann's management style and losses that amounted to billions of dollars.

Neumann ultimately stepped down as chief executive and Sandeep Mathrani became CEO. Mathrani has since reduced costs by $1.6 billion, according to WeWork.

"Sometimes you don't pick the path (and) a path picks you. In December, we were approached by BowX and other SPACS," Mathrani told CNBC in an interview.

"We had seen a path to profitability and we thought it was a good time to raise additional liquidity to de-risk the balance sheet, and to make sure that we have a path to profitability," Mathrani added.

BowX shares on Nasdaq were up 8 percent in morning trading.

WeWork, which has yet to make a profit, saw its adjusted EBITDA, a measure of a business' underlying profitability, at -$1.8 billion in 2020. However, the company predicts this will be -$900 million in 2021 and that it will achieve operating profitability of $500 million in 2022.

WeWork was also affected by the COVID-19 pandemic, which led to many office staffers working from home. Its revenues for 2020 were flat at $3.2 billion.

"We believe that WeWork is going to be the opportunity stock for the recovery," BowX co-CEO Vivek Ranadiv told CNBC.

In total, WeWork expects to raise $1.3 billion in cash from the merger, funded by the $420 million BowX raised in its IPO in August and an $800 billion private investment in public equity from investors, including Insight Partners, Starwood Capital Group and Fidelity Management.

PJT Partners was WeWork's financial adviser on the deal, while UBS Group AG advised BowX.