The flexible office space provider said in a regulatory filing on Wednesday that it would restate financial results for 2020 and the first three quarters of 2021 because the calculations were made using the wrong number of public shares.
The stock fell more than 5% to as low as $ 7.86 after the disclosure.
WeWork went public in October through a special purpose acquisition company called BowX Acquisition Corp., led by Sacramento Kings owner and former TIBCO Software CEO Vivek Ranadive. Wednesday’s filing indicates that when BowX organized its IPO, before combining with WeWork, some of the shares issued were erroneously classified as “permanent shares” instead of “temporary shares.”
In consultation with the accounting firm of BowX, WeWork said it decided on Nov. 29 that all of its financial reports from last year “should be restated to report all public shares as temporary equity.” Its existing reports “should no longer be relied on,” WeWork said.
The announcement marks another setback for WeWork, which was rescued in 2019 by SoftBank after excessive losses and an over-inflated valuation that forced the company to abandon its initial IPO plans. Co-founder Adam Neumann was ousted as CEO, and the company scaled back its ambitions to focus solely on offices.
Due to the misclassification of stocks, WeWork now recognizes that “there was a material weakness in internal control over financial reporting” when it came to accounting for certain aspects of public stocks. The company said the material weakness will be described in its amended reports.