(Bloomberg) -- In the latest lawsuit over WeWork’s scuttled IPO, investors say the company hoodwinked them by promoting a transformation of the concept of workspace in order to sell hundreds of millions of dollars worth of stock.
The complaint was filed as a class action on behalf of investors who bought shares in the privately held company for 2 1/2 years before the IPO was canceled in September and the value of WeWork plummeted. They allege that WeWork executives and board members overhyped the business plan and downplayed its losses as “strategic investment spending that would lay the foundation for profitability.”
“As would later be revealed, WeWork was engaged in profligate spending in a reckless bid for growth at all costs –- not in a manner designed to sustainably grow its business, but rather to induce capital raises from investors at ever higher valuations,” according to the complaint filed Wednesday in San Francisco federal court.
Softbank Group was an early investor in WeWork and two of its directors, also named in the suit, were on the WeWork board.
WeWork didn’t immediately respond to a request for comment.
(Updates with request for comment from WeWork.)
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