Your assignment
Role: Equity-research associate preparing an initiation memo before deciding whether WeWork's proposed non-GAAP measures aid or obscure analysis
Deliverable: A measure-reconstruction table and investor memo evaluating labels, reconciliations, recurring adjustments, comparability, governance, liquidity, and missing evidence.
Evidence basis: public records
Evaluation criteria
- measure reconstruction (30%): Starts from the stated GAAP measure, traces every adjustment, verifies arithmetic, and preserves sign, period, scope, and units.
- adjustment and comparability analysis (30%): Tests each exclusion for recurrence, operating relevance, managerial discretion, cash implications, and peer comparability.
- governance and incentive context (20%): Connects measure design and related-party or control context without using governance concerns as an automatic accounting conclusion.
- bounded investor conclusion (20%): States what the measure can and cannot answer and requests specific evidence for valuation, liquidity, and unit economics.
Your role and decision
WeWork's 2019 registration statement presented GAAP information alongside management-defined performance measures, including Community Adjusted EBITDA. Your portfolio manager asks whether the measure reveals operating economics or mainly removes costs that are central to the business model.
Evidence packet
Use the filed S-1 and the later withdrawal request. Work from the measure's own definition and reconciliation. The withdrawal establishes that the offering was withdrawn; it does not by itself prove why or resolve the merits of every accounting and governance debate.
Required work
- Reconstruct the measure from its stated GAAP starting point through every adjustment. Preserve period, units, signs, scope, subtotals, and arithmetic.
- Classify each adjustment by recurrence, operating relevance, cash effect, management discretion, and whether a peer could reproduce it.
- Explain why a reconciliation can be arithmetically correct while the measure remains unhelpful for a particular decision. Compare the questions answered by net loss, operating cash flow, EBITDA-style measures, and unit economics.
- Identify governance and related-party context that changes the evidence an investor should request, without treating governance concern as proof that a reported number is false.
Constraints
Do not silently replace WeWork's definition with a textbook EBITDA definition. Do not call an excluded cost “nonrecurring” without period evidence. Do not make an investment recommendation from the measure alone.
Evaluation
The best memo treats a non-GAAP measure as a transparent transformation to be audited, interpreted, and compared—not as either automatically deceptive or automatically superior to GAAP.