U.S. Markets open in 3 hrs 43 mins

WeWork scrambled to answer SEC questions before failed IPO: report

Evie Fordham

Embattled commercial office-sharing company WeWork was fighting with the Securities and Exchange Commission about a financial metric that gave the company's numbers a positive spin before shelving its initial public offering in September, according to previously unpublished correspondence detailed by The Wall Street Journal on Sunday.

The SEC and WeWork were going back and forth about a metric called the "contribution margin" and other concerns, The Journal reported. It's important to note that the SEC and companies often go back and forth ahead of IPOs.

EMBATTLED OFFICE-SHARING COMPANY WEWORK TO SHED ALL 'NON-CORE' BUSINESSES

WeWork wanted to keep the contribution margin, which allowed the company to switch its 2018 bottom line from a net loss of roughly $1.9 billion to a $467 million profit, according to The Journal.

"As currently calculated and presented, we believe that your [contribution margin] measure could be misleading," an Aug. 30 letter from the SEC to WeWork said according to The Journal. "Please remove disclosure of this measure throughout your registration statement."

The SEC still had unresolved concerns as of Sept. 11, shortly before the IPO crumbled. The contribution margin could still be found in WeWork's revised prospectus more than 100 times in mid-September, when the company was hoping to drum up investors' support.

The regulator also questioned WeWork's predictions that included 100% occupancy of office spaces.

SOFTBANK TAKES CONTROL OF TROUBLED WEWORK

A spokeswoman for WeWork's ex-CEO Adam Neumann told The Journal that he and the company "disclosed related-party transactions in the [prospectus] in accordance with applicable law and good governance."

WeWork chose a rescue offer from investor SoftBank over a competing proposal from JPMorgan Chase in October.

WeWork is cutting jobs and exiting businesses as it implements a 90-day improvement plan following its failed attempt to go public.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

FOX Business' inquiry to WeWork was not immediately returned.

CLICK HERE TO READ MORE ON FOX BUSINESS

Related Articles