WeWork’s life as a public company is off to a rough start.
The coworking firm said Wednesday it has to revise its financial statements for three quarters after finding that it misclassified some of its public shares. WeWork disclosed that it previously counted certain shares as permanent equity, but those shares should have been called temporary equity.
WeWork also said the company’s management concluded there “was a material weakness in internal control over financial reporting relating to the interpretation and accounting” for certain parts of its shares.
The company announced the news in a filing with the Securities and Exchange Commission on Wednesday afternoon. WeWork shares were down 4.5 percent to $8.07 as of 10:15 a.m. today.
The announcement comes about a month after WeWork merged with BowX Acquisition Corp to go public through a special purpose acquisition company. The SPAC came two years after WeWork’s previous attempt at going public failed.
Hours after WeWork filed with the SEC, the company issued a press release saying that “WeWork’s plans to restate the financial statements of its predecessor, BowX, are unrelated to WeWork’s current operations and WeWork’s financial statements. The “material weakness” referenced in the filing today existed at BowX and does not carry over to WeWork.”
Under new leadership, the company is cutting costs and trying to carve a pathway to profitability. It is also distancing itself from co-founder Adam Neumann.
The misstatement, though, is a blow to WeWork’s bid for a new identity.
WeWork said in preparation of the financial statements through Sept. 30, it reevaluated an accounting classification of the Class A common stock issued as part of units sold in the IPO by the company’s predecessor, BowX Acquisition Corp. WeWork determined that the shares include “certain redemption features” that are “not solely within the company’s control” and thus should not have been classified as permanent equity.
The mischaracterization of these shares was included on BowX’s annual report filed in 2020 as well as two quarters of BowX’s financial statements and on WeWork’s third-quarter earnings report.
WeWork said those financial statements “should no longer be relied upon.”
Earlier this month, Neumann made his first public comments since his ouster and expressed “tremendous regret” over the way the failed public offering hit employees at the firm. During the company’s 2019 IPO attempt, it came to light that WeWork had substantial losses and numerous related-party transactions.
UPDATE: This story has been updated to add WeWork statement in sixth paragraph, updates share price.