WeWork: flexible Spac-e fuels a comeback

Just 18 months ago, WeWork, the US office sharing company, appeared to be on the brink of collapse. Once one of America’s most valuable start-ups, with a $47bn valuation, WeWork had become a byword for folly and excess. It narrowly averted running out of money when backer SoftBank bailed it out.

The mania for special purpose acquisition companies means WeWork now has a second shot at a listing. It has begun talks with BowX Acquisition, a Spac, to go public. A deal — which still requires finding additional investors to make up the minimum $1bn investment sought by WeWork — could value the business at $9bn, including debt.

WeWork may have slimmed down and lost its wayward founder but it remains lossmaking, reporting a $3.2bn loss last year. The company hopes that a record volume of Spac money flooding into the market will help float the leaky boat.

Surprisingly, WeWork compares fairly well with some of the more speculative companies joining public markets via Spac-mergers (see Nikola). WeWork’s business model of short term office leases is not new. Parting ways with free-spending founder Adam Neumann helps too. 

Much depends on what happens to office space after the pandemic. Occupancy rates across WeWork’s global portfolio stood at 47 per cent at the end of 2020, down from 72 per cent at the start, as work from home took hold. 

WeWork expects occupancy to recover to rise to 90 per cent in 2022. That looks like typical ebullience. But it would make sense if more companies opted for flexible work space contracts and use lower occupancy, short-term leases for hybrid working models.

Still, that does not mean, as WeWork claims, that revenues will more than double from last year to $7bn by 2024. WeWork’s model of packing lots of workers into shared offices may not appeal if the pandemic lingers. Plenty of landlords and flexible office space providers will court tenants aggressively if it ends. Neumann has left the building but WeWork’s lofty ambitions have not.

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