- WeWork is going public via a SPAC merger with BowX Acquisition Corp.
- Ousted WeWork CEO Adam Neumann called the co-CEO of BowX in November, sources said.
- During the call, Neumann phelped set the spark for the SPAC deal, they said.
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An unlikely figure helped set the spark for SoftBank Group's $9 billion deal to take WeWork public.
Neumann co-founded WeWork in 2010 before being ousted as its CEO in September 2019.
Neumann was locked in a fierce legal battle with SoftBank over a $3 billion deal for a portion of his and other investors' stake in the shared-workspace company when he had a Zoom call with BowX Acquisition Corp co-chief executive Vivek Ranadivé in November 2020.
The call was facilitated by a senior UBS Group AG capital markets banker, the sources said, and preceded discussions the SPAC chief had with WeWork.
Neumann played up WeWork's prospects on the call and the conversation piqued Ranadivé's interest, the sources said.
Ranadivé's SPAC had been looking for an acquisition target after raising $420 million in an IPO in August.
The ensuing deal announced on Friday cushions some of the blow SoftBank has suffered with its investment in WeWork. It has invested at least $18.5 billion in WeWork since 2017, including $6 billion when a fundraising round valued the startup at $47 billion in January 2019.
The sources described the meeting between Neumann and Ranadivé on condition of anonymity. Representatives for Neumann, UBS, and SoftBank declined to comment. Ranadivé did not respond to multiple requests for comment.
Neumann, who has kept a low profile since his unceremonious ousting after WeWork's failed IPO attempt in 2019, has had a contentious relationship with SoftBank.
The Japanese tech investment giant pushed for his ousting before it took over WeWork in a $10 billion rescue financing deal in October 2019. It later backtracked on an agreement to buy $3 billion of WeWork shares from Neumann and other investors, citing criminal and civil investigations into WeWork, the company's failure to restructure a joint venture in China, and the shift to remote work due to the COVID-19 outbreak.
One week before the case was due to go to trial, SoftBank reached a settlement with Neumann and other investors in February to pay out about half of its original commitment. It did not want the potential legal liability to jeopardize the SPAC deal, the sources said.
Neumann also stands to benefit from the SPAC deal as he still has a roughly 10% stake in WeWork, worth around $790 million.
WeWork had limited options for going public
Neumann had no role in the SPAC deal after his discussion with Ranadivé, the sources said. Ranadivé and his team began discussions with WeWork in December. SoftBank Chief Operating Officer and WeWork Executive Chairman Marcelo Claure led the negotiations on behalf of SoftBank, with SoftBank CEO Masayoshi Son also stepping in, one of the sources said.
WeWork was apprehensive about opting for a traditional IPO following its failed attempt in 2019, and its options for a SPAC deal, a cheaper and faster route to take a company public, were limited. BowX was the only SPAC that expressed a serious interest in WeWork, two of the sources said.
The deal was received well by Wall Street, with BowX shares ending trade on Friday up 20% following the merger's announcement.
WeWork's valuation was revised down in the final stages of the negotiations. Investors participating in the private investment in public equity (PIPE) transaction managed to drive down WeWork's valuation in the agreement from $9.9 billion to $9 billion, including debt, the sources said. This is more than three-quarters less than WeWork's $47 billion valuation in January 2019.
The size of the PIPE increased to $800 million from $500 million, ths sources said.
Ranadivé and the rest of the BowX senior team will receive WeWork shares worth almost $90 million after investing $11.7 million of their own money. They will be restricted from selling these shares for the first year unless certain share price targets are met.
Ranadivé, who owns the Sacramento Kings basketball team, said last week WeWork stood to benefit from a shift by many companies to a hybrid model of working that calls for employees to come in to a workplace just a few days a month.
But though demand for shared-working spaces is set to grow, WeWork has been cutting back on its own workforce. The company has dismissed more than two-thirds of its employees over the past year and a half.
WeWork runs more than 800 shared offices across 152 cities.