In April of 2018 the WSJ reported that WeWork’s revenues had doubled to $866 million ahead of the company’s proposed bond offering. Co-founder Adam Neumann was creating a fantastic investment narrative and investors had piled into the 8-year-old company providing $6 billion at up to a $20 billion valuation. The challenge facing the company: losses had also doubled to $933 million.
Fortunately, a marketing solution was available in the form of adjusted EBITDA. WeWork would push the envelope on an otherwise common attempt to inflate earnings with words vs. dollars.
It called the fully adjusted number “community adjusted Ebitda,” by which it subtracted not only interest, taxes, depreciation and amortization, but also basic expenses like marketing, general and administrative, and development and design costs. Those earnings were $233 million, WeWork said.
“I’ve never seen the phrase ‘community adjusted Ebitda’ in my life,” said Adam Cohen, founder of Covenant Review, a bond research company.