WeWork Plans to Restate Financials and Admits Material Weakness
Posted on 12/01/2021
WeWork, the provider of flexible office space, experienced a controversial path to achieve public company status. WeWork went public in October 2021 through a special purpose acquisition company (SPAC) called BowX Acquisition Corp.
In a regulatory filing, WeWork said it will restate financial results for 2020 and the first three quarters of 2021 for the sponsor of its SPAC, because calculations were made using the wrong public share count.
According to the filing, “In connection with the preparation of the financial statements as of September 30, 2021, WeWork Inc. (the “Company”) reevaluated its application of Accounting Standards Codification (“ASC”) 480-10-S99, Distinguishing Liabilities from Equity, to its accounting classification of the Class A common stock subject to possible redemption (the “Public Shares”) issued as part of the units sold in the initial public offering by the Company’s predecessor, BowX Acquisition Corp. (“BowX”). The Company had previously classified a portion of the Public Shares in permanent equity. 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.
Therefore, on November 29, 2021, after consultation with WithumSmith+Brown, PC, BowX’s independent registered public accounting firm prior to the business combination (“Withum”), the Company’s management and audit committee of the board of directors (the “Audit Committee”) concluded that the previously issued (i) audited balance sheet as of August 7, 2020 included in BowX’s Annual Report on Form 10-K/A filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 12, 2021 (the “2020 Form 10-K/A”), (ii) audited financial statements as of and for the periods ended December 31, 2020 included in the 2020 Form 10-K/A, (iii) unaudited interim financial statements included in BowX’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the SEC on May 24, 2021, (iv) unaudited interim financial statements included in BowX’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 11, 2021 and (v) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, filed with the SEC on November 15, 2021 (the “Q3 Form 10-Q”) (collectively, the “Affected Periods”) should be restated to report all Public Shares as temporary equity. Considering such restatement, the financial statements for the Affected Periods, as well as the relevant portions of any communication which describes or are based on such financial statements, should no longer be relied upon.
The Company plans to restate the financial statements as of December 31, 2020 in an amendment to the 2020 Form 10-K/A and the unaudited interim financial statements as of March 31, 2021, June 30, 2021, and September 30, 2021 in an amendment to the Q3 Form 10-Q, both to be filed with the SEC.
In addition, the Company’s management has concluded that, that in light of the classification error described above, there was a material weakness in internal control over financial reporting relating to the interpretation and accounting for certain complex features of the Public Shares. The Company’s remediation plan with respect to such material weakness will be described in the amendments to the 2020 Form 10-K/A and the Q3 Form 10-Q.
The Company’s management has discussed the matters disclosed in this Current Report on Form 8-K pursuant to this Item 4.02 with Withum.”
LINK: https://www.sec.gov/ix?doc=/Archives/edgar/data/1813756/000119312521345312/d211477d8k.htm