Flexible co-working space provider WeWork’s Initial Public Offering is open for subscription and will be clsoing on October 7. The company has set a price band of Rs 615 to Rs 648 per share for its Rs 3,000 crore IPO. The IPO entirely comprises an offer for sale (OFS) of 4.63 crore shares. Under this, promoter group Embassy Buildcon LLP and investor 1 Ariel Event Limited (a part of WeWork Global) will sell their stakes. The company had raised Rs 1,348 crore from anchor investors ahead of its IPO. The much-debated IPO has now landed in a legal controversy alongside the Securities and Exchange Board of India (SEBI), said reports. The first hearing took place in the Bombay High Court on October 3 and the next hearing will take place on October 7.
What Is The Case?
An investor, Vinay Bansal, has filed a writ petition claiming that the company’s draft red herring prospectus (DRHP) contains false statements and hides key facts. He says it fails to disclose a criminal chargesheet against the promoters for serious economic offences, reported NDTV.
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Bansal told the court that he had already complained to SEBI about major gaps in the DRHP, such as misleading claims about brand ownership, weak financials, and the concealment of criminal cases against promoters. He alleges these issues still remain in the red herring prospectus, said the report.
According to Hindustan, the petition asks the court to order SEBI to quickly decide on his complaint and issue a clear, detailed order within a set timeline. Bansal has also requested that SEBI investigate the irregularities and stop the company’s securities from being listed until the matter is fully addressed.
SEBI Can Impose Restrictions: Petitioner
As per reports, the petition in the Bombay High Court claimed that Section 11A of the SEBI Act gives SEBI clear authority to impose restrictions on any issue in order to ensure investor protection and market integrity. The petitioner reportedly argued that the funds raised through IPOs would not create any tangible assets or business opportunities for the issuer. The petitioner alleged that the IPO has primarily been designed to provide promoters an exit route at the cost of retail investors, which violates SEBI’s general order of 2012 and the principles laid down therein and thus, SEBI can impose a restriction on the IPO, alleged the investor, said reports.
SEBI’s Inaction
According to the reports, the petitioner accused SEBI of inaction in the face of extensive complaints filed against the company planning to go public. The petition states that despite complaints being filed with SEBI, no decision was taken on the matter, nor was any reasoned message issued. Instead, only a general order was passed, which, according to the petitioner, violates the stipulated principles.
WeWork Confident Of Strong Response
Karan Virvani, MD & CEO, WeWork India, told NDTV Profit on Friday that flexible co-workspace is a sunrise sector of commercial real estate and the company has sufficient capital at present. Speaking about the IPO, Virvani said, “WeWork went through an extensive book building process. The company has ICICI Prudential, HDFC MF, Motilal Oswal and Axis – all of these are really large names and has a very high quality book. Also global firms like Goldman and Mundi have now joined the cap table. So that is what we wanted, a very high quality book, and if that meant doing the IPO at a slightly lower price, we’re completely okay with it. We think that in the next few months or the next few quarters, this won’t matter, as everyone will get to make money, and everyone will see some upside for sure.”
