One of the world’s largest asset managers has taken an extraordinary public swipe at WeWork, describing its investment in the shared-office space provider as a “debacle”.
T Rowe Price said in a report filed to the US Securities and Exchange Commission on Thursday that its “terrible investment” in the start-up had caused it “outsized headaches and disappointments”.
T Rowe Price’s Mid-Cap Growth Fund invested in the upstart property group in 2014 and said in the annual filing that WeWork — later backed by Japanese technology group SoftBank — repeatedly ignored its advice on slowing its aggressive expansion.
“They took our advice for a few months, but new investors soon arrived who convinced management to put its foot back on the accelerator,” T Rowe Price said in the filing.
The criticism by the Baltimore-based fund manager is a highly unusual public rebuke for one of its investment companies and indicative of how badly investors were burnt by WeWork’s failed initial public offering in September. WeWork declined to comment.
Decline in value of T Rowe Price Mid-Cap Growth Fund’s WeWork investment in the 12 months to September 2019
WeWork’s valuation crashed from $47bn to $8bn between January and October last year after institutional investors rejected both the proposed IPO’s valuation and its governance arrangements.
T Rowe Price said it repeatedly expressed its displeasure with WeWork’s “eroding corporate governance” and sold down part of its stake in the company in 2017 and 2019.
WeWork rejected a proposed deal for T Rowe Price to sell its remaining shares to a large, unnamed investor last year, it added.
Those shares were “worth a fraction of their earlier valuation” after the IPO was abandoned, the filing said.
The rebuke comes as WeWork has embarked on an aggressive turnround plan under new management as part of SoftBank’s $9.5bn rescue package.
Earlier this week the company, led by new chairman Marcelo Claure, unveiled targets for reaching profitability.
WeWork aims to be profitable by 2022 and to report $1bn of quarterly revenue this year.
“We will continue to improve the company’s financial position, implement our new operating model and pursue disciplined growth on our path to adjusted Ebitda profitability by next year,” Mr Claure said.
T Rowe Price’s filing said it was possible new management would improve operations, but it was “ready to declare this a terrible investment”.
The Mid-Cap Growth Fund was one of the worst hit by WeWork’s valuation implosion.
A report by fund tracker Morningstar in November showed the value of the Mid-Cap Growth Fund’s WeWork investment plunged 74 per cent from $65.74 in September 2018 to $17.03 a year later.
“In short, we believe the WeWork debacle was an error in judgment, not in process,” the T Rowe Price filing added.