As a public company, WeWork is off to a tough start.
First, in November, the coworking giant provided its earnings report for the third quarter and disclosed a net loss of $844 million, revealing that the company was not only racking up big losses but was hemorrhaging money.
Then, this week on Wednesday, WeWork said it must now revise its third quarter financial statements after discovering that it misclassified some of its public shares.
Previously, WeWork disclosed that it had counted certain shares as permanent equity, but those shares should have been filed as temporary equity, according to an article by The Real Deal.
The coworking firm also said that the management team concluded there was a “material weakness in internal control over financial reporting relating to interpretation and accounting” for certain parts of its shares.
WeWork announced this news in a filing with the Securities and Exchange Commission on Wednesday afternoon. At the time of the filing, the company’s stock dropped more than 5% to as low as $7.86 in extended trading after the disclosure.
In order to overturn its error, WeWork will have to restate its financial results for 2020 and the first three quarters of 2021 for the sponsor, BowX Acquisition Corp., of its special purpose acquisition company (SPAC).
The misstatement of its earnings comes as a major blow to WeWork’s bid for a new identity, underscoring the fact that the coworking firm has a long way to go to recover its pandemic losses and become profitable.