Adam Neumann's Alleged Self-Dealing At WeWork Under Investigation By SEC, N.Y. Attorney General
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The Securities and Exchange Commission is looking into whether the coworking giant violated any financial rules as it pitched its initial public offering to investors, Bloomberg reports. The office of New York State Attorney General Letitia James has also launched an investigation to see if Neumann's intertwining of WeWork and his own businesses, among other things, violated any laws, Reuters reports.
Both investigations will look into Neumann's practice of leasing space in buildings he personally owned to WeWork, as well as his trademarking of the word "We" and nearly $6M sale back to his company when he initiated a name change from WeWork to The We Company, Reuters reports. That deal was unwound as the company's attempt to go public sputtered under investor scrutiny.
The SEC is also investigating the possibility that WeWork obscured key financial information from potential investors as a way to drum up interest in its IPO, Bloomberg reports. WeWork didn't respond to a Bisnow request for comment.
Neither of the investigations are guaranteed to produce formal charges, but they serve as a reminder of the recent past WeWork is trying to move past.
SoftBank Group, the investor mainly responsible for pushing WeWork's private valuation to $47B, stepped in to purchase a majority stake in the company valuing it at less than $8B in late October. The lifeline was necessary because of the company's prodigious rate of spending, which led to a $1.25B loss in Q3 and reportedly would have led to financial ruin by the end of November without the SoftBank bailout.
SoftBank CEO Masayoshi Son believes that under the leadership of new chairman (and Sprint chairman, and SoftBank executive) Marcelo Claure, WeWork's fortunes can turn around in as little as 90 days. A major part of that turnaround will be in trimming staff, with layoffs of at least 4,000 employees — a third of the company's total workforce — imminent, The New York Times reports.
One workforce shift is already underway: WeWork is transferring its U.S. and Canada facilities and maintenance staff to JLL, which will then contract those workers to their same positions, Business Insider reports.
Though the report claims the process would take until Dec. 9, an anonymous worker advocate group calling itself the WeWorkers Coalition claimed on Saturday, Nov. 16, that the 1,000 or so affected employees had been required to agree to the move by Monday the 19th or agree to "voluntary resignation," forfeiting unemployment benefits.
One such worker, speaking on condition of anonymity, confirmed to Bisnow that most at his level had already become JLL employees, though some still worked directly for WeWork.