WeWork disclosed Wednesday that it will restate financials provided in the process of going public, and admitted a material weakness in control of its financial reporting, sending shares down more than 5% in after-hours trading.
WeWork WE, -2.65%, which rents out co-working space, revealed in a filing with the Securities and Exchange Commission that it will have to file reworked financial information because it failed to properly account for some equity as it went public through a special-purpose acquisition company, or SPAC, less than two months ago.
Many companies that have gone public through a SPAC have been forced to restate their financial information in a similar manner, after the SEC clarified rules for SPACs, including big-name SPAC targets like Virgin Galactic Holdings Inc. SPCE, -7.13% and DraftKings Inc. DKNG, -9.58%
See also: Virgin Galactic, DraftKings to amend financials after SEC guidance for SPACs
WeWork went public long after those companies, and after they had restated their financials. The stock began trading as WeWork in October after combining with BowX Acquisition Corp., a SPAC that went public in August 2020. When the SPAC went public, it did not properly account for some equity, and the problem was not fixed in the run-up to the merger.
“The Company had previously classified a portion of the Public Shares in permanent equity,” WeWork explained in the filing. “Upon further evaluation, the Company determined that the Public Shares include certain redemption features not solely within the Company’s control that, under ASC 480-10-S99, require such shares to be classified as temporary equity in their entirety.”
WeWork also disclosed that the misclassification of the equity led its management team to determine it had a material weakness in overseeing its financial reporting. It will detail its plans to address the weakness in future filings.
WeWork shares fell more than 5% in after-hours trading following the disclosure, after closing with a 2.7% decline at $8.46. Shares have traded between $8.02 and $14.97 since the merger, with Wednesday’s close valuing the company at roughly $6.2 billion, according to FactSet.
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