Thus far, everyone has heard of the plummeting of WeWork. Although everything came to light soon after filing their IPO papers, the company’s issues go way back. As it turns out, soon to be former CEO is to blame for most of the company’s wrongdoings.
This summer, a string of high ranking members of staff left the company, all of them blaming Adam Neumann, the firm’s CEO and co-founder. What’s more, the paperwork the company submitted with the intention of going public has raised eyebrows, placing the company under a microscope.
For starters, documents in the filing showed that Neumann paid himself a total of $5.9 million, being payment for the trademark rights of “We”, the first part of the company’s name. Although he has already put back the money, this is only one of the many vices he engaged in.
In July, the Wall Street Journal revealed that the CEO cashed out $700 million in stock sales. Naturally, this is a move that shareholders wouldn’t take very kindly. For a company that is just to go public, the norm is usually for its top executives to cash out after the IPO.
This is because the assumption is usually that the stock will increase in value, making it the better option to cash out after the public offering. Any smart business mind would get this, right? As such, it became the reason why Neumann would cash out that early. Did he know something that investors in the company had no idea about?
Additionally, it turns out that the company co-founder owns four buildings rented out by WeWork, with this being an out and out conflict of interest. Being as smart a player in the game as he is, Neumann can’t possibly feign ignorance, so it’s in the right of his critics to bay for blood.
As for the company’s valuation, interested parties have had quite the reason to be skeptical. In January this year, WeWork was valued at $47 billion. That’s an enviable valuation, right? However, for a company that generated revenue worth $1.8 billion, it still made losses worth $1.6 billion in 2018.
By June this year, the company had already registered a loss of $1.3 billion, a clear telling sign that 2019 may be much worse than 2018. While all this is happening at WeWork, its competitor, IWG, is raking in profits. For the first half of 2019, IWG has already reported a $62.8 million profit on revenue of $1.6 billion.
Transparency in WeWork seems to be a foreign concept, as INC reports. Apparently, the company owes $47 billion in leases thanks to the nature of how they do business. As you know, they provide working space to other companies, so they lease properties to which they must pay rent even if said spaces are unoccupied.
There’s a whole mess about why they owe so much though, with investors complaining that the company doesn’t give them enough insight into WeWork finances. This sentiment is also echoed by other interested parties, and don’t they say that there’s no smoke without fire?
No wonder some media outlets are describing September as having been the worst month in the company’s history.