Ucommune, China's WeWork, Drops IPO Plans in Favor of a SPAC

The trend contines as Ucommune will be acquired by Orison Acquisition, a special purpose acquisition company (SPAC).
Steven LernerAug 21,2020,19:00

Chinese co-working space provider Ucommune has abandoned its plan to make an initial public offering in the U.S. and has instead opted to go public as part of a backdoor listing.

Ucommune has entered into an agreement to be acquired by Orison Acquisition, a special purpose acquisition company (SPAC). A growing trend, SPACs or “blank check” companies, are similar to reverse mergers but not identical. Unlike reverse mergers, SPACs typically come with significant management groups and more financing. Reverse mergers, on the other hand, involve a private company buying a shell company that has no current operations but is publicly traded.  While the shell becomes the surviving entity pos-merger, the private company (and typically its management) become the operators.  

The newly-combined company, called Ucommune International, will be listed on the Nasdaq and is reportedly ready to go public this quarter.

Reports indicate a $769 million valuation of the new company, which represents a 75 percent decrease from its $3 billion valuation used for Ucommune’s Series D funding in 2018.

Beijing-based Ucommune, established by Chinese real estate mogul Daqing Mao, publicized plans to go public back in December 2019 on the New York Stock Exchange under the ticker symbol “UK.”

It was reported as early as May 2018 that Ucommune intended to go public within the next few years, but a series of challenges blocked the traditional IPO route.

In December, shortly after announcing its IPO, Citigroup and Credit Suisses Group backed out of underwriting the deal due to a disagreement with the valuation.

The comparisons with WeWork, which had its own infamous IPO fiasco in late 2019, hurt the valuation of Ucommune. A decline in revenue due to the pandemic has also stung the company.

Recent pressure from the SEC, due in part to the Luckin Coffee accounting scandal, has forced Chinese companies to reconsider what it takes to go public on U.S. exchanges.

“In light of the current capital markets condition, the Company is considering other alternatives and has determined not to proceed at this time with the offering and sale of the securities proposed to be covered by the Registration Statement,” Zhuangkun He wrote in a statement to the SEC on August 6.

No securities from the original IPO were sold, according to the statement.