WeWork in Talks to Combine With SPAC or Raise Money Privately

The company also has received separate offers for a new private investment round, and it may well take that route instead, one of the people said. If it were to do so, WeWork would stay private and use the money to support its growth initiatives.

The talks are complicated and there is no guarantee WeWork will end up striking any dealsoon, the people cautioned.

“Over the past year, WeWork has remained focused on executing our plans for achieving profitability,” Lauren Fritts, WeWork’s chief communication officer, said. “Our significant progress combined with the increased market demand for flexible space, shows positive signs for our business. We will continue to explore opportunities that help us move closer towards our goals.”

WeWork is a big player in the market for flexible office space. It signs long-term leases with landlords, then after renovating a space and furnishing it, subleases small offices or even whole buildings to tenants for as little as a month at a time.

Should WeWork make its public debut through a SPAC, it would cap what had been a long and bumpy road toward a listing. WeWork’s attempt to tap the public markets in 2019 failed when investors rejected the money-losing company and its visionary yet erratic leader, Adam Neumann, who subsequently resigned as chairman and CEO.

It also would be one of the brightest markers in a craze surrounding SPACs, or blank-check companies as they are also known. SPACs go public as empty vehicles without a business and then hunt for one to latch onto. The transaction transforms the target into a public company in a deal that can be less time-consuming and cumbersome than a traditional IPO.

This year alone, more than 80 new SPACs have debuted, nearly five per business day, according to data provider SPAC Research.

Bow Capital Management is run by Vivek Ranadivé, owner of the NBA’s Sacramento Kings and founder of Tibco Software Inc. The SPAC raised $420 million last year. The venture firm lists basketball great Shaquille O’Neal as an adviser.

Mr. Mathrani is nearly a year into his tenure as WeWork CEO, a time in which he faced not only a company that was bleeding cash but also a pandemic that forced people to stay away from offices.

While the commercial office-space market was pummeled by the virus, WeWork had an ample cash cushion thanks to a late-2019 rescue financing from SoftBank Group Corp. At the start of the pandemic, WeWork had already begun to close numerous locations, renegotiate leases and sell noncore businesses and had cut thousands of jobs in a bid to slash expenses.

The company wasn’t seeking capital and doesn’t have an immediate need for cash, some of the people said. WeWork, which had been in danger of running out of cash when the IPO fell apart, had more than $3 billion on its balance sheet as of the third quarter, when it last reported results. Mr. Mathrani has said WeWork is expected to become profitable by the end of 2021.

WeWork had negative free cash flow of $517 million in the third quarter on $811 million in revenue, which was down 8% from the second quarter.

SoftBank has majority ownership of WeWork and the Japanese technology conglomerate’s future role will be a key factor in negotiations with potential merger partners or new investors.

A $10 billion valuation would still be a far cry from WeWork’s peak valuation in early 2019, when a SoftBank funding round pegged it at $47 billion.

SoftBank and other investors were attracted to WeWork’s rapid growth—doubling in revenue each year. But that growth was fueled by extraordinary levels of spending, resulting in similarly fast increases in losses. After the failed IPO, WeWork scaled back Mr. Neumann’s grand vision of providing a slew of 21st-century services around the world.

As stocks plunged last spring, SoftBank marked down its valuation for the company to $2.9 billion.

—Eliot Brown contributed to this article.

Write to Maureen Farrell at [email protected] and Konrad Putzier at [email protected]