Will WeWork’s IPO Be Luckier the Second Time?

WeWork has gone public through a reverse merger with the BowX Acquisition SPAC (BOWX). The stock will begin trading on Oct. 21 under the ticker symbol “WE” in what's the office-sharing company's second attempt at going public—its 2019 IPO was stalled. What’s the forecast for WE stock? Will its second IPO attempt be luckier?

WeWork’s merger with BOWX values the company at $9 billion, a tiny fraction of the $45 billion valuation it was aiming for in 2019. Whereas most recently listed companies have sought a massive premium over their previous valuation, it’s a different game for WeWork.

That said, the $9 billion enterprise value WeWork managed to get is similar to the valuation at which SoftBank invested in the company after the IPO was stalled. The capital infusion from SoftBank, which has sunk billions into the company, was nothing short of a bailout for the cash-starved company.

Technically, WeWork isn't listing through an IPO but a SPAC merger. The regulatory arbitrage granted through a SPAC allows companies to provide financial forecasts they can’t offer in a traditional IPO, and some SPAC stocks can really take off initially—BOWX stock was trading below its SPAC IPO price of $10 before its merger vote and jumped after the merger was approved. Inevitably, many SPAC stocks fall later on, but some hang onto their post-merger gains.

WeWork forecasts its sales will fall 17 percent in 2021 and then rise 64 percent in 2022. Its 2022 projection might not be considering the several factors at play in the office-sharing business, though.

One main consideration is that more companies may offer work-from-home options to their workers. As a result, the demand for office spaces might come down. Conversely, some companies that would have otherwise gone for a long-term lease might opt for office sharing because of its flexibility.

Although WeWork has also been taking measures to increase its revenue and address its losses, these measures aren't set to pay off until the medium to long term. As part of its merger, WeWork will get $1.3 billion in gross proceeds, similar to what was committed to during the merger announcement.

Lately, there's been a spate of redemptions in SPAC IPOs, taking companies back to the drawing board and giving them far less money than planned. This is the last thing WeWork needs. To make up for shareholder redemptions, the company has already received an equity backstop facility from Cushman & Wakefield. While its business environment may have improved, WeWork isn't necessarily destined for a joyride as a publicly traded company.