WeWork has gone public via a merger with special purpose acquisition company.
After organizing and failing to launch an initial public offering, office-space provider WeWork has gone public via a merger with special purpose acquisition company (SPAC), BowX Acquisition. Under the terms of the deal, Softbank—WeWork’s main backer—will retain a majority stake in the company and will honor a one-year lockup for its shares, according to reports.
SPACs are public shell companies designed to merge with or acquire private companies and make them public companies without going through an IPO process. A SPAC acquisition typically takes three to six months to complete, compared to an IPO’s 12- to 18-month period. Such benefits have led SPACs to generate $83 billion of investments in 2020 and another $100 billion in the first quarter of 2021.
“If you had told me at the beginning of the year that we would already exceed 2020 totals before the end of the first quarter, I would not have believed it. It’s been quite phenomenal, and there are no real signs of the momentum stopping meaningfully anytime soon,” Carlos Alvarez, head of permanent capital solutions at UBS Group, told Reuters earlier this spring.
“The public equity markets democratize access to capital for entrepreneurs and also democratize access to investment opportunities for investors,” said Nikolai Roussanov, a finance professor at the University of Pennsylvania’s Wharton School, during a Wharton Executive Education roundtable on SPACs. “There is also a sense that going public has become costlier for firms, both in terms of the monetary cost that the company founders bear and in terms of the time it takes to go public.”
Companies looking to raise capital while avoiding an IPO are also investigating direct listings, which allow a company to sell shares directly to investors via stock exchanges. Spotify, Slack and Squarespace all went public through direct listings.
The outlook for raising capital via SPACs and other non-IPO methods likely will remain strong for technology and other companies looking for alternate methods of financing.
