(Reuters) – WeWork, is facing scrutiny by the U.s. Securities and Exchange Commission over whether it breached the financial regulations in the run-up to the abandoned initial public offering, Bloomberg reported on Friday, citing two people with knowledge of the matter.
FILE PHOTO: A WeWork’s logo is seen at a WeWork office in San Francisco, California, USA, September 30, 2019. REUTERS/Kate Munsch/File Photo
The SEC’s investigation is of a preliminary nature and may not result in allegations of wrongdoing, Bloomberg reported, adding that it was not possible to determine whether a specific WeWork’s business decisions and transactions to be asked in the review.
WeWork closed its initial public offering (IPO) in September after investors grew wary of mounting losses, a business model, the high-lease-obligations and corporate governance issues, which forced the former president and chief executive officer and co-founder, Adam Neumann, to resign.
Construction and other WeWork government officials are also being sued by a minority shareholder who accused the company, of the board of directors of breach of fiduciary duty.
Masayoshi Son, president of SoftBank Group, which took control of the WeWork last month, and it is also one of the defendants in the case.
The SEC’s enforcement division, it is the rate of WeWork’s business and the disclosure of information to investors, following reports in the media showed interest, and that of the company’s funds, according to the report.
WeWork has managed to maintain the top of Wall Street’s lawyer, Andrew Ceresney, who is the head of the SEC’s enforcement unit, Bloomberg reported.
WeWork, and for the SEC, declined to comment.
The SEC also took issue with WeWork, the use of non-standard financial reporting rules, including a profitability measure called the “contribution margin,” the Wall Street Journal reported on Sunday. The SEC told WeWork, the term could be misleading.
WeWork should be clearly stated, the losses could continue to mount in the near term, at the time of the IPO filing, analysts have said. WeWork also have not been able to make a cash flow statement, which would show, it would run out of money if they did not receive the anticipated funding from the board liquidity event.
Neuman is accused of self-dealing, or acting in their own interest rather than that of the company. Neumann earned $5.9 million, for the sale of the rights to the name, We are a Company, WeWork with the parent, to which he returned in September after an open call.
Material information has been omitted at the time of the IPO filing, including the Construction on the board’s compensation committee, when he was the chief executive officer, the Journal reported in October.
The Company on Wednesday said net loss in the third quarter, more than doubling to $1.25 billion.
Reporting Uday Sampath, Bengaluru, additional reporting by Herbert Lash in New York; Editing by Marguerita Choy and Maju Samuel