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WeWork debuts in public markets after the SPAC merger, refill on lunch

WeWork's shares soared up to 12% Thursday lunchtime after the company went public through a special purpose vehicle more than two years after the failed IPO.

The stock is currently up more than 6%.

The office rental company abandoned plans to go public in 2019 after investors raised concerns about its business model and corporate governance, as well as its founder and then CEO Adam Neumann.

Plans to Merge with BowX Acquisition Corp. were first announced in March in a deal that reportedly valued the company at around $ 9 billion.

Valuation is a sharp drop from 2019 when WeWork was originally valued at a whopping $ 47 billion by SoftBank Group. Its valuation slowly declined as the news about the company's finances surfaced and investor demand subsided.

"You said this was a story with drama," WeWork Executive Chairman Marcelo Claure told CNBC's Squawk Box on Thursday. "Sure, this is a story where a lot of people wrote documentaries that it was the end of WeWork. Well, the resistance, the persistence of these people is incredible. This company is here, is stronger than ever, and undoubtedly is we "We will celebrate many more milestones."

What went wrong

WeWork's troubles began in August 2019 when the company's IPO revealed it had lost $ 1.9 billion the previous year and was on track to use up the remaining cash. A crippling report in the Wall Street Journal in September raised concern about how Neumann ran the company, including possible illegal activity.

Neumann stepped down as CEO that month. CNBC reported in October that he would receive a package worth up to $ 1.7 billion to leave WeWork and give up his voting rights. Real estate manager Sandeep Mathrani later took on the role of CEO.

"WeWork is an amazing brand and if someone gives you a great brand to flip, you have to say yes," Mathrani told CNBC's Squawk Box.

After the failed IPO, WeWork's problems continued. That November, Reuters reported that the New York State Attorney General was investigating the company, including whether Neumann was doing self-business to get rich.

These included reports that Neumann bought the brand for the word "We" and planned to charge WeWork $ 6 million for the transfer. Self-dealing is when someone acts in their own interest and not in the interests of their customers.

Bloomberg also reported earlier that month that WeWork was being scrutinized by the US Securities and Exchange Commission for its disclosures to investors in the run-up to its failed IPO.

The failed IPO and the onslaught of the pandemic led to several rounds of layoffs in the company at the end of 2019 and 2020. WeWork also suffered massive losses when Covid-19 closed offices around the world.

Claure told "Squawk Box" that everyone "had an important role to play" and that Neumann would be recognized as a visionary who had the idea.

Neumann congratulated the new management team during a media interview on Thursday morning in the outdoor beer garden at The Standard, an expensive hotel in New York's Meatpacking District. He and co-founder Miguel McKelvey "couldn't be happier" to celebrate the IPO, Neumann said.

"It was always about the team and what we did together and we are just so proud for today and for this day," he said.

Takeover of SoftBank

SoftBank made its first multi-billion dollar investment in WeWork in 2017 through its $ 100 billion Vision Fund, which has also funded Silicon Valley startups like Uber. The Japanese technology giant invested a total of 18.5 billion US dollars in WeWork in the run-up to the failed IPO.

In October 2019, SoftBank agreed to spend $ 10 billion on an 80 percent stake in WeWork. As part of the deal, SoftBank also said it would buy $ 3 billion worth of shares from investors and employees, but canceled those plans in April 2020, in part due to government investigations against the company.

SoftBank gradually lowered WeWork's valuation to $ 7.3 billion in late December 2019 and $ 2.9 billion in early 2020.

During a results presentation later that year, SoftBank CEO Masayoshi Son said he was "foolish" for his company's multi-billion dollar investment in WeWork.

"We failed in investing in WeWork and I have admitted multiple times that I was stupid," he said, according to a FactSet transcription of the call.

Claure told CNBC's "Squawk Box" that Son was "excited" that the company is going public.

"WeWork was worth zero two years ago and the fact that we grew it from zero to $ 8 billion to $ 9 billion is great," Claure said in the Squawk Box.

The comeback of WeWork

The pandemic recovery has since accelerated the demand for flexible workplaces as more workers switch to hybrid or permanent remote work.

In March, WeWork agreed to the $ 9 billion SpaC merger with BowX acquisition, a move that was completed on October 20, according to a person familiar with the matter, Reuters previously reported.

SPACs, also known as blank check companies, are set up solely for the purpose of raising money through an IPO and using this money to acquire an existing company. They have skyrocketed in the last few months as celebrities like Shaquille O'Neal hop on the trend. Companies like Virgin Galactic and Lucid Motors have used SPACs to go public, but their structure has also been scrutinized by the SEC.

BowX Acquisition raised $ 420 million when it went public in August 2020. WeWork is traded under the ticker WE.

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