SEC launches WeWork probe: report

It comes as SoftBank stalls on a planned $3B tender offer

TRD NATIONAL /
Nov.November 15, 2019 04:05 PM
WeWork is reportedly facing an SEC probe

WeWork is reportedly facing an SEC probe (Credit: iStock)

The U.S. Securities and Exchange Commission has launched an inquiry into WeWork to determine if the company violated reporting rules ahead of its doomed planned public offering.

Citing two unnamed sources, Bloomberg reported that SEC investigators are scrutinizing disclosures made to investors while the company embarked on aggressive fundraising efforts and completed transactions that posed potential conflicts of interest.

The agency’s inquiry is reportedly in its early stages, and may not lead to allegations of wrongdoing. WeWork has reportedly retained Andrew Ceresney, a former head of the SEC’s enforcement unit.

A WeWork spokesperson declined to comment.

The report adds to mounting concerns for shareholders. During a period that involved the departure of CEO and co-founder Adam Neumann and a $39 billion drop in valuation, WeWork reported to shareholders Wednesday that it lost $1.25 billion in the third quarter as expenses again trumped growth.

And on Thursday, The Real Deal reported that SoftBank has delayed the launch of its promised $3 billion tender offer for more than a week. The offer is contingent on meeting “required regulatory approvals” and the absence of litigation, bankruptcy proceedings and debt defaults. Following the report, WeWork’s junk bonds value sunk while their risk jumped.

Some shareholders have begun to revolt. A former WeWork employee and shareholder filed a derivative lawsuit in California last month, accusing Neumann, other key executives and its main investor, SoftBank, of self-dealing and unjustly enriching themselves. The lawsuit is seeking class-action status.

The SEC inquiry is reportedly focused on claims WeWork executives made to investors ahead of the planned IPO. According to Bloomberg, WeWork spent big ahead of the IPO to demonstrate expansive growth to existing investors. By doing so, it depleted cash reserves and shortened the timeframe in which WeWork would run out of cash. SoftBank, its largest investor, ultimately saved the company and committed to a $9.5 billion lifeline, which included the $3 billion tender offer.

Multiple transactions disclosed in the company’s pre-IPO filing to the SEC, known as an S-1, have faced extensive scrutiny by investors, including a $5.9 million payment to Neumann for giving the company rights to the trademark “We.” Other transactions involved WeWork leases with buildings owned by Neumann. These arrangements have since been unwound.

However, another transaction that has been scrutinized is WeWork’s $850 million purchase of the Lord & Taylor building in Manhattan. Multiple executives — including Eric Gross and Neumann — had dual interests in the acquisition, as TRD previously reported. Board member and investor Steven Langman had interests in three sides of the deal.


Related Articles

arrow_forward_ios
Daily Digest Miami

Monroe County seeks $150M to combat sea level rise, Bloomberg’s record may polarize voters

Daily Digest Miami

South Florida home sales struggle in October, Cipriani and Terra plan luxury condo

Daily Digest Miami

Ten-X Commercial laid off half of its workforce, Miami professor who taught class on money laundering allegedly laundered millions

Daily Digest Miami

Compass sweetens agent stock program for 2020, affordable housing project in downtown Fort Lauderdale lands $27M loan: Daily digest

Daily Digest Miami

Panattoni drops $24M to build new industrial project near Opa-locka, One Sotheby’s International Realty acquired Treasure Coast Sotheby’s: Daily digest

Daily Digest Miami

Feds say FIU, FDOT contractors at fault for deadly bridge collapse, Infinity Real Estate looks to sell part of Paramount Bay in Edgewater: Daily digest

Daily Digest Miami

Saks makes bid for Barneys, Eighty Seven Park will offer a certified botanist: Daily digest

Daily Digest Miami

Homebuyers who bought after the market crash have made billions, Terra closes on $185M construction loan: Daily digest

arrow_forward_ios