Hours after published reports that packaged companies with shared workspace WeWork is laying off 4,000 employees, the company is in the cross-chairs in the state of New York.
According to Reuters, New York State Attorney General Letitia James has launched an investigation into the company. "We received a request from the New York State Attorney General's Office and are cooperating in the case," said a WeWork spokesman.
Although the details of the investigation are not entirely clear, the Softbank-backed company has had major concerns in recent months about the sustainability of its business model, which relies on a mix of long-term debt and short-term revenue.
It also faced criticism of its governance standards when its founder Adam Neumann had 20 times the voting rights of ordinary shareholders before his departure as the company's CEO in September. Neumann, which negotiated a payout of nearly $ 2 billion as part of its exit, will continue with the company in an advisory role.
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It still led to the mounting constitution that WeWork presented and eventually scrapped its plans to go public. This was followed by a financial rescue package from Softbank where the company's valuations dropped by almost $ 40 billion, from $ 47 billion to just $ 8 billion.
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WeWork, last week, reached out to T-Mobile CEO John Legere to review the leadership of the company as soon as January, but Legere has since declined the offer.
Meanwhile, the drum with pending layoffs gets louder. According to an email from The Washington Post, WeWork CEO 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 cut salaries as a result of WeWork getting rid of "noncore companies." An additional 1,000 jobs held by construction maintenance employees are transferred to an external contractor.
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