Will a PSPC succeed where WeWork’s IPO attempt failed?

WeWork made a shocking announcement, indicating its intention to go public through a Special Purpose Acquisition Company (SPAC) involving Shaquille O’Neal. This follows the news that WeWork lost $ 3.2 billion in 2020 and comes two years after its first attempt to go public quite dramatically.

With working from home being one of the big investing themes of the past year, it may seem odd for the company to attempt a $ 9 billion valuation.

Enter BowX [BOWX], a SPAC which counts Shaquille O’Neal as one of its advisers. Reports suggest WeWork is in talks with PSPC over a potential merger and is said to be seeking $ 1 billion in funding to reach a valuation of $ 9 billion – well below the $ 47 billion for which it was assessed following private financing from SoftBank. [9984] in 2019.

Should investors care about a WeWork IPO?

In the documents seen by the Financial Times, WeWork once again refuses to describe itself as an office business. Instead, it describes itself as a “global real estate technology platform” and a “thin asset.” The documents include a projected rebound to 90% occupancy by 2022, which is well above its pre-pandemic levels as the FT Remarks. They also forecast EBITA of $ 485 million for 2022, with revenue dropping from $ 3.2 billion in 2020 to $ 7 billion in 2024.

“WeWork has spent the past year transforming the business and refocusing its core business, while simultaneously managing and innovating through a historic recession. As a result, WeWork has become the global leader in the flexible space with a stronger value proposition than ever, ”said Sandeep Mathrani, CEO of WeWork.

“WeWork has spent the past year transforming the business and refocusing its core business, while simultaneously managing and innovating through a historic recession. As a result, WeWork has become the global leader in the flexible space with a stronger value proposition than ever before ”- Sandeep Mathrani, CEO of WeWork

There is debate as to how achievable WeWork’s revenue goals are. WeWork’s business crumbled last year as occupancy rates jumped from 72% to 47%, according to the Financial Times. According to the publication, WeWork’s losses come despite cutting its capital spending to $ 49 million, a drop of 98% from the $ 2.2 billion it spent in 2019.

Where next?

While WeWork’s sleek office spaces were in turmoil in 2019, it now seeks to fit into a world in which the pandemic has changed the nature of white-collar work. Companies offering remote work solutions like Zoom [ZM], Soft [WORK] and Microsoft [MSFT] have seen their stocks skyrocket. Facebook [FB] said employees can work from home forever, while HSBC [HSBC] and Lloyds [LLOY.L] banks reduced their office space by 40% and 20% respectively. Lloyds cited a survey that showed 77% of its 68,000 employees wanted to work from home three or more days a week.

This change is reflected in the Direxion Work From Home ETF [WFH], which is up over 31% from the previous year. However, WeWork could actually benefit from the shift to flexible working.

“Instead of just having an office space, we’ll have a work ecosystem,” said David Smith, occupant research manager for the Americas at Cushman & Wakefield. Vox Recode. So while people won’t go to the office every day, they will still need an office space to learn, collaborate, and socialize.

As a provider of leasable office space, WeWork offers a way for businesses to leverage this flexible model without the long-term costs of ownership. Recode cites data that shows companies – those with 500 or more employees – now make up 54% of WeWork members. These tend to be more stable than smaller members and often rent entire floors.

WeWork’s IPO comes at a time when a return to the office is likely to occur in one form or another. Whether its flexible business model can align with new ways of working will go a long way in determining the quality of the investment opportunity of its IPO.