WeWork facing massive layoffs now has New York State asking questions
Hours after published reports that embattled shared-workspace firm WeWork is about to lay off 4,000 employees, the company finds itself in the crosshairs of the state of New York.
According to Reuters, New York State Attorney General Letitia James has launched an investigation into the company. “We received an inquiry from the office of the New York State Attorney General and are cooperating in the matter,” a WeWork spokesperson said.
While the specifics of the investigation are not fully clear, the Softbank-backed company has faced serious concerns over the past few months about the sustainability of its business model, which relies on a mix of long-term liabilities and short-term revenue.
It also faced criticism of its governance standards as founder Adam Neumann had a whopping 20 times the voting power of ordinary shareholders before his departure as the company’s chief executive officer in September. Neumann, who negotiated a near-$2 billion payout as part of his exit, will stay on with the company in an advisory role.
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Still, the mounting censure led to WeWork tabling, and ultimately, scrapping its plans to go public. That was followed by a financial rescue package from Softbank which saw the company’s valuation drop by nearly $40 billion, from $47 billion to just $8 billion.
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WeWork, last week, reached out to T-Mobile head John Legere to overhaul leadership at the company as soon as January, but Legere has since declined that offer.
Meanwhile, the drumbeat of pending layoffs is getting louder. According to an email obtained by The Washington Post, WeWork Executive Chairman Marcelo Claure said the layoffs would begin this week and were necessary to create a “more efficient, more focused and even more customer-centric organization.”
The New York Times reported that 1,000 jobs would be cut from the payroll as a result of WeWork getting rid of "noncore businesses." Another 1,000 jobs held by building maintenance employees will be transferred to an outside contractor.