References to the "Company," "BowX Acquisition Corp.," "BowX," "our," "us" or
"we" refer to BowX Acquisition Corp. The following discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with the unaudited interim condensed financial statements and the
notes thereto contained elsewhere in this report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
U.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated as a Delaware corporation on May 19,
2020. We were formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the "Business Combination"). We are not
limited to a particular industry or sector for purposes of consummating a
Business Combination. We are an emerging growth company and, as such, we are
subject to all of the risks associated with emerging growth companies.
Our sponsor is BowX Sponsor, LLC, a Delaware limited liability company of which
Vivek Ranadivé, the Company's Chairman and Co-Chief Executive Officer, and
Murray Rode, our Co-Chief Executive Officer and Chief Financial Officer, are the
managing members (the "Sponsor"). The registration statement for the initial
public offering (the "Initial Public Offering") was declared effective on
August 4, 2020. On August 7, 2020, we consummated our Initial Public Offering
of 42,000,000 units (the "Units" and, with respect to the Class A common stock
included in the Units being offered, the "Public Shares") at $10.00 per Unit,
generating gross proceeds of $420.0 million, and incurring offering costs of
approximately $23.7 million, inclusive of $14.7 million in deferred underwriting
commissions. On August 10, 2020, the underwriter exercised the over-allotment
option to purchase an additional of 6,300,000 Units at the Initial Public
Offering price at $10.00 per Unit and we consummated the sale of such Units on
August 13, 2020, generating additional gross proceeds of $63.0 million, and
incurring additional offering costs of approximately $3.5 million, inclusive of
approximately $2.2 million in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 6,933,333 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant in a private placement to
certain of the initial stockholders and certain funds and accounts managed by
subsidiaries of BlackRock, Inc (the "Private Placement Warrants Purchasers"),
generating gross proceeds of $10.4 million, and incurring offering costs of
approximately $8,000. In connection with the consummation of the sale of
additional Units pursuant to the underwriter's over-allotment option on
August 13, 2020, we sold an additional 840,000 Private Placement Warrants to
the Private Placement Warrants Purchasers, generating additional gross proceeds
of approximately $1.3 million.
Upon the closing of the Initial Public Offering and the Private
Placement(including the exercise of the over-allotment) $483.0 million ($10.00
per Unit) of the net proceeds of the sale of the Units in the Initial Public
Offering and the Private Placement were placed in a trust account ("Trust
Account") located in the United States with Continental Stock Transfer & Trust
Company acting as trustee, and held as cash or invested only in U.S. "government
securities," within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less, or in money market funds
meeting certain conditions under the Investment Company Act, which invest only
in direct U.S. government treasury obligations, as determined by us, until the
earlier of: (i) the completion of a Business Combination and (ii) the
distribution of the Trust Account as described below.
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We will only have 24 months from the closing of the Initial Public Offering, or
August 7, 2022, to complete our initial Business Combination (the "Combination
Period"). If we do not complete a Business Combination within this period of
time (and stockholders do not approve an amendment to the amended and restated
certificate of incorporation to extend this date), we will (i) cease all
operations except for the purpose of winding up; (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem the Public
Shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account including interest earned on the funds held
in the Trust Account and not previously released to us to pay its taxes (less up
to $100,000 of interest to pay dissolution expenses), divided by the number of
then outstanding Public Shares, which redemption will completely extinguish
Public Stockholders' rights as stockholders (including the right to receive
further liquidating distributions, if any); and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining
stockholders and our board of directors, dissolve and liquidate, subject in the
case of clauses (ii) and (iii) to our obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law. Our
Sponsor and the other holders of the Founder Shares (as defined below),
excluding funds and accounts managed by subsidiaries of BlackRock, Inc (the
"initial stockholders"), have entered into agreements with us, pursuant to which
they have waived their rights to participate in any redemption with respect to
their Founder Shares in the event we do not complete a Business Combination
within the required time period; provided, however, if the initial stockholders
or any of our officers, directors or affiliates acquire Public Shares in or
after the Initial Public Offering, they will be entitled to a pro rata share of
the Trust Account upon our redemption or liquidation in the event we do not
complete a Business Combination within the required time period. In the event of
such distribution, it is possible that the per share value in the Trust Account
will be less than the Initial Public Offering price per Unit in the Initial
Public Offering.
Proposed Business Combination
On March 25, 2021, we, BowX Merger Subsidiary Corp., a Delaware corporation
("Merger Sub") and a direct, wholly owned subsidiary of the Company, and WeWork
Inc., a Delaware corporation ("WeWork"), entered into an Agreement and Plan of
Merger (the "Merger Agreement"), pursuant to which, among other transactions, on
the terms and conditions set forth therein, Merger Sub is to merge with and into
WeWork (the "First Merger"), with WeWork surviving the First Merger as a wholly
owned subsidiary of us (WeWork, in its capacity as the surviving corporation of
the First Merger, is sometimes referred to as the "Surviving Corporation"); and
as promptly as practicable and as part of the same overall transaction as the
First Merger, such Surviving Corporation will be merged with and into BowX
Merger Subsidiary II, LLC, a Delaware limited liability company ("Merger Sub
II") and a direct wholly owned subsidiary of us (the "Second Merger" and,
together with the First Merger, the "Mergers" and, collectively with the other
transactions described in the Merger Agreement, the "Business Combination"),
with Merger Sub II being the surviving entity of the Second Merger (Merger Sub
II, in its capacity as the surviving entity of the Second Merger, is sometimes
referred to herein as the "Surviving Entity"). In connection with the Closing
(as defined herein), BowX intends to change its name to WeWork Inc. (such
post-Closing entity, "New WeWork").
As a result of and upon the Closing, among other things, all outstanding shares
of WeWork capital stock of the First Merger (other than shares of WeWork Class C
common stock, treasury shares, the dissenting shares and shares of WeWork
capital stock reserved in respect of WeWork awards) will be cancelled in
exchange for the right to receive an aggregate of 655,300,000 shares of New
WeWork Class A common stock (at a deemed value of $10.00 per share) representing
a pre-transaction equity value of WeWork of approximately $7.9 billion (the
"Aggregate Merger Consideration"). An additional 80,000,000 shares of New WeWork
Class A common stock will be purchased (at a price of $10.00 per share) at the
Closing by certain third-party investors (collectively, the "PIPE Investors"),
for a total aggregate purchase price of $800,000,000 (the "PIPE Investment").
The proceeds of the PIPE Investment, together with the amounts remaining in our
trust account.
Refer to the preliminary proxy statement/consent solicitation
statement/prospectus, included in the Registration Statement on Form S-4 filed
with the Securities and Exchange Commission on May 14, 2021 for additional
information.
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Liquidity and Capital Resources
As of March 31, 2021, we had approximately $839,000 in cash and working capital
deficit of approximately $1.1 million.
Through March 31, 2021 our liquidity needs were satisfied through a payment of
$25,000 from the Company's Chairman and Co-Chief Executive Officer to cover for
certain offering costs in exchange for the issuance of the Founder Shares (as
defined below), and the loan under the Note (as defined below) of approximately
$150,000 to us to cover for offering costs in connection with the Initial Public
Offering. Subsequent to the consummation of the Initial Public Offering on
August 7, 2020, the liquidity needs have been satisfied through the net proceeds
from the consummation of the Private Placement not held in the Trust Account. We
fully repaid the Note on August 7, 2020. In addition, in order to finance
transaction costs in connection with a Business Combination, our officers,
directors and initial stockholders may, but are not obligated to, provide us
Working Capital Loans (as defined below). To date, there were no amounts
outstanding under any Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet its needs through the earlier of the
consummation of a Business Combination or one year from this filing. Over this
time period, we will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the Business Combination.
Management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the unaudited consolidated condensed financial statements. The unaudited
condensed consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception up to March 31, 2021 was in preparation for
our formation, the Initial Public Offering, and, since the closing of our
Initial Public Offering, a search for business combination candidates. We will
not be generating any operating revenues until the closing and completion of our
initial Business Combination.
For the three months ended March 31, 2021, we had net loss of approximately
$5.6 million, which consisted of approximately $2.3 million in general and
administrative expenses, approximately $3.3 million in change in fair value of
warrant liabilities and approximately $49,000 in franchise tax expense, offset
by approximately $47,000 in interest income on the Trust.
Related Party Transactions
Founder Shares
On May 26, 2020, we issued 10,062,500 shares of Class B common stock to our
company's Chairman and Co-Chief Executive Officer in exchange for a payment of
$25,000 for offering costs made by our Sponsor on behalf of our company (the
"Founder Shares"). In July 2020, the Chairman and Co-Chief Executive Officer
transferred certain Founder Shares to our directors and officers as well as to
certain third parties. On August 4, 2020, we effected a stock dividend of
0.2 shares of Class B common stock for each share of Class B common stock
outstanding, resulting in an aggregate of 12,075,000 Founder Shares outstanding.
All shares and associated amounts have been retroactively restated to reflect
the share dividend. On August 13, 2020, the underwriters exercised their 15%
over-allotment option in full; thus, the Founder Shares were no longer subject
to forfeiture.
The initial stockholders have agreed, subject to limited exceptions, not to
transfer, assign or sell any of the Founder Shares until the earlier to occur
of: (A) one year after the completion of the initial Business Combination and
(B) subsequent to the initial Business Combination, (x) if the last reported
sale price of the Class A common stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period
commencing at least 150 days after the initial Business Combination, or (y) the
date on which we complete a liquidation, merger, capital stock exchange,
reorganization or other similar transaction that results in all of our
stockholders having the right to exchange their shares of common stock for cash,
securities or other property.
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Related Party Loans
On May 26, 2020, our Chairman and Co-Chief Executive Officer agreed to loan us
up to an aggregate of $150,000 pursuant to an unsecured promissory note (the
"Note") to cover expenses related to the Initial Public Offering. This loan was
payable without interest upon the completion of the Initial Public Offering. We
borrowed up to the full amount of the Note and received additional advances of
approximately $45,000 advancement of funds from such officer, for a total
outstanding loan of approximately $195,000. We fully repaid the Note and the
advances to such officer on August 7, 2020.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial Business Combination, the initial
stockholders, officers and directors and their affiliates may, but are not
obligated to, loan us funds as may be required (the "Working Capital Loans"). Up
to $1.5 million of such Working Capital Loans may be convertible into warrants
of the post-Business Combination entity at a price of $1.50 per warrant at the
option of the lender. Such warrants would be identical to the Private Placement
Warrants. Except for the foregoing, the terms of such loans, if any, have not
been determined and no written agreements exist with respect to such loans to
date. To date, we did not have any borrowings under the Working Capital Loans.
Contractual Obligations
Registration Rights
The initial stockholders and holders of the Private Placement Warrants are
entitled to registration rights pursuant to a registration rights agreement. The
initial stockholders and holders of the Private Placement Warrants will be
entitled to make up to three demands, excluding short form registration demands,
that we register such securities for sale under the Securities Act. In addition,
these holders will have "piggy-back" registration rights to include their
securities in other registration statements filed by us. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
We granted the underwriter a 45-day option to purchase up to 6,300,000
additional Units to cover any over-allotments, at the Initial Public Offering
price less the underwriting discounts and commissions. On August 10, 2020, the
underwriter fully exercised the over-allotment option.
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
$8.4 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, $0.35 per unit, or $14.7 million in the aggregate will be
payable to the underwriter for deferred underwriting commissions. The deferred
fee will become payable to the underwriter from the amounts held in the Trust
Account solely in the event that we complete a Business Combination, subject to
the terms of the underwriting agreement.
In connection with the consummation of the sale of Units pursuant to the
over-allotment option on August 13, 2020, the underwriter received an aggregate
of $1.26 million in underwriting fees and additional deferred underwriting
commissions of approximately $2.2 million.
Critical Accounting Policies
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. The investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the unaudited condensed balance
sheets at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these securities is included in gain
on marketable securities, dividends and interest held in Trust Account in the
accompanying unaudited consolidated condensed statements of operations. The
estimated fair values of investments held in the Trust Account are determined
using available market information.
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Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value. Shares
of conditionally redeemable Class A common stock (including Class A common stock
that feature redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely
within our control) are classified as temporary equity. At all other times,
shares of Class A common stock are classified as stockholders' equity. Our
Class A common stock features certain redemption rights that are considered to
be outside of our control and subject to the occurrence of uncertain future
events. Accordingly, at March 31, 2021 and December 31, 2020, 44,349,470 and
44,911,184 shares of Class A common stock subject to possible redemption are
presented as temporary equity, outside of the stockholders' equity section of
the accompanying unaudited consolidated condensed balance sheet.
Net Income (Loss) Per Share of Common Stock
Net income (loss) per share of common stock is computed by dividing net loss
applicable to stockholders by the weighted average number of shares of common
stock outstanding during the periods. We have not considered the effect of the
warrants sold in the Initial Public Offering and Private Placement to purchase
an aggregate of 23,873,333 shares of Class A common stock in the calculation of
diluted earnings per share, since their inclusion would be anti-dilutive under
the treasury stock method. As a result, diluted earnings per share is the same
as basic earnings per share for the periods presented.
Our unaudited consolidated condensed statement of operations includes a
presentation of income per share for common stock subject to redemption in a
manner similar to the two-class method of income per share. Net income per
share, basic and diluted for Class A common stock is calculated by dividing the
investment income earned on the Trust Account of approximately $47,000, net of
applicable income and franchise taxes of approximately $47,000 for three months
ended March 31, 2021, by the weighted average number of shares of Class A common
stock outstanding for the period. Net loss per share, basic and diluted for
Class B common stock for the three months ended March 31, 2021 is calculated by
dividing the net loss of approximately $5.6 million, less net income
attributable to Class A common stock, by the weighted average number of Class B
common stock outstanding for the period.
Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of its financial instruments, including
issued shares purchase warrants, to determine if such instruments are
derivatives or contain features that qualify as embedded derivatives, pursuant
to ASC 480 and ASC 815-15. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as
equity, is re-assessed at the end of each reporting period.
We account for its 7,773,333 warrants issued in connection with the Private
Placement as derivative warrant liabilities in accordance with ASC 815-40.
Accordingly, we recognize the warrant instruments as liabilities at fair value
and adjusts the instruments to fair value at each reporting period. The
liabilities are subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in the statements of
operations. The fair value of warrants issued by us in connection with the
Private Placement has been estimated using Public Warrant trading prices at each
measurement date.
Recent Accounting Pronouncements
Our management does not believe there are any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our financial statements.
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Off-Balance Sheet Arrangements
As of March 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the unaudited condensed
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
Recent Accounting Pronouncements
Our management does not believe there are any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our unaudited condensed financial statements.
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