WeWork SPAC

FILE - This Oct. 15, 2019, file photo shows a WeWork logo at the entrance to one of their office spaces in the SoHo neighborhood of New York. WeWork is merging with BowX Acquisition in a transaction that would value the embattled communal office-space company at $9 billion plus debt and take it public, according to a report.The Wall Street Journal said Friday, March 26, 2021, that WeWork would also raise $1.3 billion, according to people familiar with the matter. (AP Photo/Mary Altaffer, File)

NEW YORK — Uncertainty about demand for office space in a global pandemic is a big risk that investors will have to weigh as WeWork makes a second run at a public stock offering.

A year after the novel Coronavirus turned office towers into ghost towns worldwide, the embattled communal work space company said Friday it would merge with special purposes acquisition company BowX Acquisition and seek a public listing.

But the offering comes as many companies are switching to hybrid work schedules, allowing employees to stay at home part of the time and go to the office only for group meetings or projects. That means firms already locked into leases will have too much space and aren’t likely to need WeWork’s short-term conference rooms or offices.

“You’re going to find they can accommodate most pop-up meetings inside their office, so they don’t have to go to WeWork,” said Patrick Dore, a former Notre Dame real estate law professor who has handled office space deals in Manhattan.

The announcement Friday comes almost two years after WeWork’s first attempt at an IPO blew up in spectacular fashion, with CEO and founder Adam Neumann being ousted.

The agreement values WeWork at $9 billion plus debt, far below the $47 billion in September 2019 when the IPO fell apart after massive losses were revealed in regulatory filings.

The deal with BowX provides a lifeline to WeWork. Armed with cash raised from investors, SPACs look for private companies to buy so they can easily list stock on an exchange. WeWork said it would also raise $1.3 billion.

During a call with industry analysts on Friday, WeWork said it anticipates strong growth as the economy recovers. The company is forecasting 1.5 million total memberships at some point in 2024. That compares with 476,000 in 2020. Revenue, excluding China, is predicted to climb to $7 billion, more than double last year.

WeWork leases buildings and divides them into office spaces to sublet to members, which include small businesses, start-ups and freelancers who want to avoid paying for permanent office space. The company’s operating expenses were exorbitant and it became reliant on repeated cash infusions from private investors.

“Short-term real estate rental is not a particularly good business,” said Michael Cusumano, professor of technological innovation, entrepreneurship and strategic management at the Massachusetts Institute of Technology. “WeWork is similar to a rental car company that has fleets of cars that nobody is renting.”

Still, WeWork said that during the past year, it has cut costs, shed non-essential ventures and reduced its workforce by 67% from its peak in September 2019. The company said it has focused on landing more longer membership commitments.

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