Magic of finance in the time of the Covid and free money: you are unable to go public, have you thought about the Special Purpose Acquisition Companies (SPAC)? Behind this name, a new way of selling on Wall Street, by reversing the chronology: investors create an empty shell company, take it to the stock market to raise additional capital with the objective of buying a company. After a few months, the trick is played, the target company is merged with the SPAC and becomes, de facto, listed on the stock exchange, without having to convince investors and market authorities as in a traditional IPO.
This is what is happening with the coworking company WeWork, start-up queen in the United States before the health crisis, which had to interrupt its IPO in the fall of 2019 in disaster. company was valued at $ 47 billion (40 billion euros) by SoftBank, one of its shareholders, but its IPO project had collapsed, when investors took a closer look at its cost structure and rejected its founding boss, Adam Neumann.
The Covid-19 crisis emptied WeWork’s shared offices, with an occupancy rate falling from 72% in 2019 to 46% at the end of 2020, and $ 6.2 billion in cash consumed in two years. But WeWork, which has a new CEO, Sandeep Mathrani, has cut costs sharply and hopes to regain a 60% occupancy rate in September. This is how she plans to be bought by a SPAC, BowX Aquisition. The company would be valued at $ 9 billion, five times less than two years ago, but the comeback embodies this change of times on Wall Street.
“If you don’t have your own PSPC, you are nothing”
The case is made possible because of the free money, which is flowing freely due to the very accommodating monetary policy of the central banks. Investors around the world, including individuals, no longer want government bonds – they can see that they are worthless and will be rolled by inflation if it does eventually return. They don’t really want shares of technology companies anymore: it’s too late, their value has soared too much in the past year. No, they want to buy companies at the cradle, before they are presentable on the stock market, dreaming of buying the Apple and Amazon of tomorrow when they are created.
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