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Rep. Alexandria Ocasio-Cortez.
- According to Democratic Rep. Alexandria Ocasio-Cortez, if you invested in WeWork, "you're getting fleeced."
- In a report by Wall Street on Parade, Ocasio-Cortez slammed the coworking startup's former $47 billion valuation in a hearing on September 11.
- WeWork slashed its valuation to $10 million on Friday.
- Read more WeWork stories here.
- Visit Business Insider's homepage for more stories.
According to Democratic Rep. Alexandria Ocasio-Cortez, if you invested in WeWork, "you're getting fleeced."
Ocasio-Cortez slammed the coworking startup's former $47 billion valuation in a hearing held by the US House of Representatives' Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets on September 11, per the financial watchdog site Wall Street on Parade.
During the hearing, representatives discussed the negative impacts private equity markets have on retail investors. As an example, Ocasio-Cortez brought up WeWork, which was valued at $47 billion in January, but is now aiming for a $10 billion valuation in advance of its upcoming IPO filing. WeWork's parent company, The We Company, lowered the valuation amid investors' concerns about its husband-and-wife cofounders, Adam and Rebekah Neumann.
"They had raised on a previous valuation of $47 billion and now they just decided overnight, 'Just kidding - we're worth $20 billion.'" Ocasio-Cortez said during the hearing, the video of which you can watch here.
"They've cut it by over half," she added. "Correct?"
Renee Jones, the Associate Dean for Academic Affairs and Law Professor at Boston College Law School, who testified at the hearing, said that valuations were highly speculative. Despite this, Jones argued that deregulation has given startup founders too much power. "When founders control the board, an important source of discipline over the startup's operations is neutralized," Jones said. "This new era of founder control has created an environment at unicorns that is ripe for management abuse."
WeWork - and Adam Neumann in particular - have gone through a battery of criticism in the run-up to IPO. While it's laid claims to being a tech company, its business model involved buying up commercial buildings and filling them with tenants, creating coworking spaces. It's yet to make a profit, losing $700 million in the first quarter of 2019 alone. Among other eyebrow-raising practices, WeWork paid Neumann $5.9 million to use the word "we" in its name, but he gave the money back after it was criticized.
Ocasio-Cortez noted a larger problem with private equity markets: a lack of information for investors.
"We have this big issue, where if you are what is known as a retail investor, an everyday person, there's this idea that there's more of an upside, but there's a larger amount of risk involved," Ocasio-Cortez said. "If you're an everyday person, and you say, 'Hey, I wanna get in on the next Uber,' would you have access to reliable valuation of that private company when you invest?"
Duke University Law Professor Elisabeth de Fontenay responded to the question, saying that investors wouldn't have access.
Alexandria Ocasio-Cortez isn't the only public figure to criticize WeWork. Democratic presidential candidate Andrew Yang called WeWork's $47 billion valuation "utterly ridiculous" in a tweet on August 21.
Business Insider reached out to Ocasio-Cortez for comment.