Investors have filed a class-action lawsuit in San Francisco federal court against WeWork, claiming that the company had misled them in the time leading up to its failed initial public offering last September.
The lawsuit involves investors that bought shares in the firm between 2017 and September 2019. It states that the coworking operator’s accounting metrics were portrayed in a fraudulent way.
“WeWork was engaged in profligate spending in a reckless bid for growth at all costs — not in a manner designed to sustainably grow its business, but rather to induce capital raises from investors at even higher valuations,” according to the suit. “In other words, WeWork expanded its business empire not because it made business sense, but for the primary purpose of inducing additional investment in the company.”
Only one investor, Malakyar Vernet, was named in the suit, while SoftBank and former WeWork CEO Adam Neumann were listed as defendants.
The suit cites news reports, investor presentations and financial records that created the facade that WeWork was a leader and revolutionary in the workspace industry. It also stated that when stripped down, WeWork was no different than any other commercial real estate company and that it’s growth was unsustainable.
On top of this lawsuit, a special committee of the board of WeWork and Neumann also filed lawsuits against SoftBank after the conglomerate walked away from its $3 billion tender offer part of a bailout package for the coworking firm.