Statement made in a filing to US SEC
T. Rowe Price has called the WeWork holding in its Mid-Cap Growth Portfolio a “terrible investment”, in an annual report filed to the US Securities and Exchange Commission.
In the report, signed by Brian Berghuis, chairman of the portfolio’s advisory committee, and John F. Wakeman, executive vice president of the portfolio, T. Rowe Price stated that WeWork was a “debacle” and that the investment was “an error in judgment, not in process”.
The T. Rowe Price fund made a small private investment in the provider of office space in 2014 and in the filing said that it “has since caused us outsized headaches and disappointments”.
The filing said: “Explicit in our investment was an understanding with WeWork’s management that they would slow the company’s blistering pace of growth and focus instead on developing a more sustainable business strategy.
“They took our advice for a few months, but new investors soon arrived who convinced management to put its foot back on the accelerator.”
The asset manager said they had communicated their “displeasure with its eroding corporate governance” to WeWork’s management and board.
It said: “In 2017 and again in 2019, we sold stock in tenders totaling about 16% of our shares and 50% of our initial investment. We also had a tentative deal to sell our remaining shares to a large investor in early 2019.
“Unfortunately, WeWork’s management had to approve the transaction, and they refused. In the wake of intense public scrutiny, WeWork abandoned its IPO plans this fall, leaving our remaining shares worth a fraction of their earlier valuation.”
T. Rowe Price told investors that it seeks to “learn from our missteps”.
“Fortunately, our cautious approach toward the private market limited the damage,” it added.
According to the report, the Mid-Cap Growth Portfolio returned 31.29% in the 12 months ended 31 December 2019.