With just weeks to go before WeWork’s planned IPO, the company was wrestling with the SEC
By Jean Eaglesham and Eliot Brown Nov. 10, 2019 5:30 am ET Just weeks before WeWork expected its stock to begin trading publicly, the startup was still wrangling with the Securities and Exchange Commission over a controversial key financial metric and a litany of other concerns about its planned multibillion-dollar IPO.
But as the IPO loomed, the SEC zeroed in on how WeWork framed its heavy losses, particularly through a bespoke profitability metric called “contribution margin,” a version of which had formerly been known as “community-adjusted Ebitda.” The agency had first ordered WeWork to remove the measure, before the company offered to substantially change it.
The SEC sent Mr. Neumann a nine-page letter on Aug. 30, telling WeWork to remove mentions of contribution margin. “As currently calculated and presented, we believe that your [contribution margin] measure could be misleading,” the letter said. “Please remove disclosure of this measure throughout your registration statement.”
WeWork’s resistance to removing the metric was directed by Mr. Neumann, people familiar with the discussions said. Mr. Neumann had previously boasted about the metric to reporters and investors, to show how the company’s core business was profitable.
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