In recent months, flexible office space provider WeWork saw its IPO (initial public offering) evaporate, Chief Executive Adam Neumann step down because of investor pressure and SoftBank buy a majority stake in the company. Unfortunately for WeWork, a new set of problems has arisen, making one wonder if it will ever get back on track.
Once known as the class of the flexible office space industry, WeWork might now have to lay off thousands of employees, the SEC (Security and Exchange Commission) is looking into the company and one of its top choices to succeed Neumann, T-Mobile CEO John Legere, is unlikely to take the job.
There’s no telling when, or if, WeWork will get out from under these setbacks, but for the time being, the company appears to have a significant uphill climb ahead of it.
Massive layoffs expected at WeWork
WeWork is preparing to dismiss at least 4,000 employees, according to The New York Times. The company hopes the layoffs will help it get stabilized after suffering significant losses at a rapid pace, according to sources. The cuts could start as soon as this week and would include both core and non-core business employees as well as building maintenance employees.
“We have to make some necessary job eliminations,” WeWork Executive Chairman Marcelo Claure said in an email to employees this week. “These actions will make us stronger and better able to generate even more opportunities over the coming months and years.”
The layoffs are in part the result of some of Neumann’s questionable decisions such as adding big office spaces in the world’s most expensive cities, offering tenants discounts and purchasing other businesses.
They are under investigation
The SEC is looking into whether or not WeWork violated financial rules leading up to its IPO, Bloomberg reports. The agency’s enforcement division is looking over the co-working company’s business and its disclosures to investors. According to sources, the inquiry comes after numerous news articles pointed out the possible conflicts of interest and WeWork’s aggressive fundraising.
New York Attorney General Letitia James is also looking to WeWork, Reuters reports. The NYAG is examining if Neumann began self-dealing to enrich himself. The former executive purchased properties that he would lease back to WeWork and borrowed against his stake in the company. Neumann also planned to charge WeWork almost $6 million to use his trademark of “We” after the company renamed itself The We Company.
“We received an inquiry from the office of the New York State Attorney General and are cooperating in the matter,” a WeWork spokeswoman told Reuters.
Neither the NYAG or SEC’s investigations may lead to any wrongdoing allegations, but they are a reminder of the recent predicaments in which the co-working company has found itself.
Legere won’t be joining WeWork
T-Mobile Chief Executive John Legere may be stepping down from his post next year, but it won’t be to succeed Neumann at WeWork. There had been reports that WeWork was interested in Legere for its top job, but he denied that speculation this week.
“I was never having discussions to run WeWork, and because we had this announcement pending, I couldn’t say it but it did create a weird awkward period of time,” Legere said on a call with investors.