WeWork has agreed to a merger with a special purpose acquisition company, or SPAC, which will take it public. The deal with BowX Acquisition Corp. placed a valuation of $9 billion on the startup, including debt. That amount is a sharp drop from what WeWork was valued at just a few years ago.
WeWork strikes a deal with a SPAC
In 2019, long before the SPAC deal, WeWork tried to go public at a $47 billion valuation. However, CNBC notes that its listing plan was botched, as investors worried about its business model and founder Adam Neumann's style of management.
At the time, bankers from Goldman Sachs said WeWork's valuation could rise as high as $54 billion. However, it ended up plunging to about $8 billion after the office-sharing company was forced to take financing from SoftBank.
Sources told Reuters earlier this week that WeWork had told potential investors that it lost approximately $3.2 billion last year from a pitch for a SPAC merger. The most recent SPAC deal will bring WeWork $1.3 billion in cash, including private investments totaling $800 million from Insight Partners, Fidelity Management, funds managed by Starwood Capital and other investors. BowX Acquisition raised $420 million from its initial public offering in August.
SPAC frenzy continues
WeWork is only the latest in a long line of high-profile firms that have gone public by merging with a SPAC.
Bloomberg reported on Thursday that the biggest Wall Street banks expect the Securities and Exchange Commission to increase its oversight of the SPAC market. Sources told the news outlet that executives believe regulators will send letters asking about the possible dangers of underwriting a flood of deals from SPACs.
One of the sources said the investigation seems to be largely fact-finding for now, but it could become a formal probe at some point, depending on what regulators learn. Reuters reported the SEC's inquiry into SPACs earlier this week. The agency said previously that it was monitoring the soaring SPAC market, but the letters to Wall Street banks are the strongest sign that it will increase scrutiny of such transactions and the banks that underwrite them.
Reuters' sources said the letters asked the banks to give details of the SPAC deals they have underwritten voluntarily, but they stop short of being an official investigative demand. However, one of the news outlet's sources said the letters came from the SEC's enforcement division, which could mean they are a precursor to an official probe.