Frankfurt. The company, which one and a half years ago became the epitome of the irrational exuberance surrounding grossly overvalued US start-ups, is now going public on the second attempt. WeWork’s first attempt failed spectacularly. A year and a half ago, the US office landlord wanted to go to Wall Street as the highest-rated start-up in the US – the company of major investor Softbank should be worth $ 47 billion to shareholders. But the skyrocketing was followed by a sudden crash when WeWork published the business documents necessary for the IPO: In addition to an obviously unsustainable business model with horrific losses and high debt, the documents also revealed a co-founder and CEO, who sometimes misused the business as his private credit institution . To prevent bankruptcy, Softbank shot another $ 9.5 billion after the $ 10 billion it had already invested. The major investor lowered the valuation to a more modest eight billion dollars almost overnight. This was followed by mass layoffs and the resignation of CEO Adam Neumann.
Wrapped in the BowX wallet
A year and a half later, a company cannot actually go public with such a mortgage. At least not a traditional one. Fortunately for Softbank, however, the so-called Spacs have been booming in the USA for around a year: “Special Purpose Acquisition Companies”. Companies with no business of their own, no products. Empty covers, called “stock market coats” in financial jargon. Mostly created by an investment company, a hedge fund or a well-known person from the corporate and financial world. This “sponsor” first brings the Spac on the stock exchange. In doing so, he collects millions from investors – against the promise to buy a promising company with this money.
The promise was made last August by the Spac “BowX Acquisition Corp”, which was then listed on the US technology exchange Nasdaq. Its sponsor Vivek Ranadivé – founder of the Californian software company Tibco – chose WeWork yesterday to keep this promise. WeWork is now valued at $ 9.0 billion.
And that although the office landlord is still writing high losses: WeWork made 3.2 billion dollars in the past year. A little less than last year, when it lost $ 3.5 billion – but WeWork cut its investments from $ 2.2 billion to a measly $ 49 million in 2020. And the prospects for this year are anything but rosy: In the course of the past year, the occupancy rate of his offices and coworking spaces fell from 72 to 47 percent.
But many yield-hungry US investors seem to ignore it: Yesterday the share price of BowX – whose listing will be taken over by WeWork – rose by 13 percent to $ 11.40.
Perhaps investors tend to believe WeWork CEO Sandeep Mathrani’s predictions. Last week he promised that capacity utilization would rise to a record 90 percent by the end of next year. According to Mathrani, sales should increase from $ 3.2 billion to $ 7.0 billion by 2024.
Forecasts that experts rate as very ambitious. But that shouldn’t matter to Mathrani or to Softbank boss Masayoshi Son. WeWork is only once on the stock exchange and received as part of the Spac deal from institutional investors such as Starwood Capital, Fidelity and Blackrock $ 800 million as well as the $ 483 million that BowX took in its IPO.
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