The U.S. Securities and Exchange Commission (SEC) is reportedly looking into WeWork to determine whether the embattled company violated financial rules while it was gearing up for its IPO, according to a report by Bloomberg.
The SEC’s enforcement arm is examining the company’s disclosures to investors amid reports of conflicts of interest and questionable fundraising practices, which are also under scrutiny.
Prompted by the inquiry, WeWork has hired Andrew Ceresney, the former SEC enforcement unit head who now works in private practice on Wall Street.
There has yet to be any official allegations against WeWork. The company has had a startling change of fortunes lately, as it was once valued at $47 billion and was considered one of the darlings of the tech sector.
The company removed its CEO Adam Neumann in September and decided not to move forward with its IPO. It is now valued at under $8 billion.
Part of the concern is that when the company turned in its S-1, a filing that comes before an IPO, the company said its losses were growing at the same pace as its sales, and sometimes even faster.
As for the perceived conflicts, Neumann was making money as a private landlord leasing to his own company. Also, when the company changed its name to We Co., it bought the “we” trademark for $5.9 million from a company that was controlled by Neumann.
Even the company’s leadership was set up in an unconventional way. WeWork listed Neumann’s wife, Rebekah, as one of the people with the power to pick a new CEO.
WeWork’s accounting practices, including the way it calculates metrics, is also being investigated. The company would use something called a “community-adjusted Ebitda,” which was in early S-1 filings but was eventually pulled.