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WeWork, the popular co-working space, is gearing up for a legal squabble with its shareholders who are suing the distressed company and several board members over financial discrepancies, Reuters reports.
WeWork, Neumann, and majority shareholder SoftBank were sued by several minority shareholders this past week, in a bid to recoup some of the losses that were suffered by the company after its planned Initial Public Offering (IPO) was postponed.
WeWork, ex-CEO Neumann, Softbank sued over botched IPO, plummeting value https://t.co/CoYRa4MjrJ
— Jennifer Ablan (@jennablan) November 9, 2019
In a proposed class-action suit filed with the San Francisco Superior Court on November 4, Natalie Sojka, a former employee at the firm, accused the company and its board of directors of breaching his fiduciary duties to minority stakeholders. Sojka maintained that the directors allowed the SoftBank Group to rescue the company by boosting its stake to about 80 percent, while also grating Neumann an exit package worth about $1.7 billion while the company’s stock continues to slide further into the red.
2019 has been a rather tough year for WeWork. The company, which changed its name to the We Company, sought to file for an IPO on the New York Stock Exchange in September 2019. However, as is with every IPO filing process, the company was required to present regulators and the government with its financial records over the years. When its application was made public by the Securities and Exchange Commission in August, things began to take a bit of a downturn.
SoftBank posts $6.5 billion operating loss on WeWork and Uber https://t.co/1ER2KXW0vh
— Bloomberg (@business) November 6, 2019
To begin, it was revealed that WeWork had lost about $1.9 billion throughout 2018, making $1.8 billion in revenues during that time frame as well. Then, you have the behavior of ex-CEO Adam Neumann, who violated several conflicts of interest regulations, when reports revealed that he owned several of the buildings leased and sold to WeWork. In addition to that, he is also said to have pocketed about $5.9 million for selling the company trademark rights to the word “We.”
In July 2019, The Wall Street Journal also reported that Neumann had cashed out about $700 million in company stock, a move which raised several eyebrows since CEOs usually wait until their companies go public before they liquidate their shares.
Soon enough, investors began to raise concerns over the company, with many believing that its staggering losses, corporate culture, as well as the eccentric behavior of Neumann would lead to its downfall. Eventually, the IPO crumbled, as the company raised concerns that not enough investors will be willing to participate in its listing after several rounds of scrutiny and austerity steps that saw its value rash from $47 billion to $10 billion.
Two months ago, the company was also hit with reports that Wi-Fi networks in several of its locations had an inherent Once you have the freedom of being the sole owner of your money, it's now your responsibility to ensure the... More vulnerability that could potentially expose customers’ information to the outside world. All of these and more continued to send WeWork stock down the drain.
However, it would seem that a recent round of layoffs got a lot of staffers irked. Meetup, a social events app that WeWork acquired for $200 million in 2017, cut up to 25 percent of its staff on November 4. The next day, Flatiron School, a coding boot camp owned by WeWork, laid off dozens of workers as well. These workers were given 3 months “garden leave,” where employees continue to stay on the payroll but are unable to work. In addition to this, they also get just one month’s severance pay. Workers are also to sign away their rights to sue WeWork over workplace issues, as well as a non-compete clause that will last between 6 to 12 months
On the flip side, Neumann, who was ousted at the behest of SoftBank after the Japanese investment firm poured a further $9.5 billion into WeWork, got a severance package worth about $1.7 billion.
The disparity and size of Neumann’s exit package, especially in a time when WeWork is barely standing, seems to be rubbing off on people the wrong way.
Will WeWork ever rise again following its recent implosion? Let us know in the comments.
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