IWG, The company, formerly known as Regus, predicts that the coronavirus outbreak will lead to more demand for flexible workspace, with companies no longer relying on one central location and establishing smaller, satellite offices closer to where talented staff are living.
The move prompted it to raise £320 million to take advantage of the expansion opportunities that it predicts will emerge from the coronavirus crisis.
“We see a growing demand for this type of workspace, particularly from mid and larger companies that have seen the light during Covid-19,” Mark Dixon, the chief executive, said.
He said that IWG will use the fundraising to grow “more aggressively” through buying struggling rival operators and taking on empty space from landlords.
Mr Dixon, 60, has invested about £91 million in the placing. Toscafund, an existing shareholder, has subscribed for 24.8 million shares for about £59 million. The fundraising was also made available to retail investors through the Primarybid platform. IWG did not disclose how many shares were sold through the platform.
Following the announcement of the successful fundraise this morning, shares in IWG climbed 39 p, or 15.1 per cent, to 299½p.
IWG was founded by Mr Dixon in 1989 and has about has 3,400 centres worldwide. The company is shifting towards a model under which it sells leases to third-party landlords under franchise agreements, giving them the right to use IWG’s spaces and brands.
Andrew Shepherd-Barron, an analyst at Peel Hunt, said: “This fundraise is IWG’s first in 16 years, and we see it as partly protective.”
IWG has net debt of around £320 million and Peel Hunt has forecast about £100 million of cash outflow during the year.
Mr Dixon said that the fundraising was “certainly not to shore up finances.”
He said: “Our liquidity today it is very strong. It has not changed from the end of last year. And this was all thoroughly tested so there was no risk at all to covenants for even the worst case scenario that we predicted.”
IWG has furloughed about 15 per cent of its workforce during the crisis and is bringing staff back gradually as lockdown eases.
The firm has come under fire for its treatment of customers during the lockdown. It has asked small businesses to sign up to longer leases in exchange for temporary rent cuts or deferrals.
Mr Dixon said: “I think that situation has largely gone away now because we helped all customers that needed it and that has cost us a significant amount of money but it is what it is and we’re pleased to have helped them so that background as far as I can see has largely subsided.”
He said that the company had agreed about £10 million of rent deferrals.