WeWork Adopts Tax Asset Preservation Plan Designed to Protect Long-Term Stockholder Value by Preserving the Availability of Its Tax Assets

WeWork, the leading global flexible space provider,  announced that its Board of Directors (the “Board”) has adopted a stockholder rights plan designed to protect long-term stockholder value by preserving the availability of WeWork’s net operating loss carryforwards (“NOLs”) and other tax attributes under the Internal Revenue Code (the “Tax Asset Preservation Plan”). The Board took this action in connection with the various transactions announced by WeWork on March 17, 2023 to significantly deleverage WeWork’s capital structure and bolster liquidity by restructuring its outstanding debt and raising additional capital (collectively, the “Specified Transactions”).

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As of December 31, 2021, WeWork had approximately $6.9 billion of U.S. federal NOLs and $6.6 billion of state NOLs that could be available to offset its future federal taxable income and state taxable income, respectively. WeWork’s ability to use these NOLs and other U.S. tax assets would be substantially limited if it experienced an “ownership change” within the meaning of Section 382 of the Internal Revenue Code (the “Code”). In general, a company would undergo an ownership change if its “5-percent shareholders” (determined under Section 382 of the Code) increased their ownership of the value of such company’s stock by more than 50 percentage points over a rolling three-year period. The Tax Asset Preservation Plan is intended to reduce the likelihood of such an “ownership change” at WeWork by deterring any person or group from acquiring beneficial ownership of 4.9% or more of WeWork’s outstanding Class A common stock.

The Tax Asset Preservation Plan is similar to those adopted by numerous other public companies with significant NOLs and/or other tax assets. The Tax Asset Preservation Plan is not designed to prevent any action that the Board determines to be in the best interests of WeWork and its stockholders, and will help to ensure that the Board remains in the best position to discharge its fiduciary duties.

Under the Tax Asset Preservation Plan, rights will initially be transferable only with the underlying shares of WeWork’s Class A common stock and Class C common stock. The rights will generally become exercisable only if a person (or any persons acting as a group) acquires 4.9% or more of WeWork’s outstanding Class A common stock. If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of Class A common stock (or in the case of holders of Class C common stock, shares of Class C common stock) at a 50% d******* or WeWork may exchange each right held by holders of Class A common stock for one share of Class A common stock (and in the case of holders of Class C common stock, each right would be exchanged for one share of Class C common stock). All holders of partnership units in The We Company Management Holdings L.P. (other than any triggering person) will be treated equitably vis-à-vis the holders of the Class A common stock if the rights become exercisable.

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Under the Tax Asset Preservation Plan, any person that currently owns 4.9% or more of WeWork’s Class A common stock may continue to own its shares of Class A common stock but may not acquire any additional shares of Class A common stock without triggering the Tax Asset Preservation Plan. Also under the Tax Asset Preservation Plan, partnership units in The We Company Management Holdings L.P. and shares of WeWork’s Class C common stock are not treated as “beneficially owned” when determining whether a person owns 4.9% or more of WeWork’s Class A common stock. Therefore, the exchange of any partnership units (and the corresponding shares of WeWork’s Class C common stock) into shares of WeWork’s Class A common stock would trigger the Tax Asset Preservation Plan to the extent the Class A common stock received upon exchange (i) increases the ownership of a 4.9% or greater holder of WeWork’s Class A common stock by even one additional share or (ii) increases the ownership of a holder of WeWork’s Class A common stock to 4.9% or greater of the outstanding shares of WeWork’s Class A common stock. The Board has the discretion to exempt any person or group as well as any transaction from the provisions of the Tax Asset Preservation Plan.

The Tax Asset Preservation Plan took effect on April 7, 2023 and is scheduled to continue in effect until April 6, 2024, unless terminated earlier in accordance with its terms.

Additional information about the Tax Asset Preservation Plan will be available on a Current Report on Form 8-K to be filed by WeWork with the U.S. Securities and Exchange Commission (the “SEC”).

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