By CCN.com: The last thing an investor wants to read in an IPO prospectus is a warning that the company’s CEO may have committed an SEC violation – even an itsy-bitsy one. But that’s the case with WeWork co-founder and CEO Adam Neumann, who is on track to become the next Elon Musk for all the wrong reasons.

Let me explain.

When the SEC says “quiet,” you need to listen!

The company’s S-1 prospectus buries a “risk factor” deep within its contents regarding prohibited interviews Adam Neumann gave a few months ago.

The SEC has something called “quiet period,” which extends from the date a company files a registration statement for selling shares until the company says that statement is officially effective.

During that period, company representatives are not allowed to issue any public statements regarding the company’s value or forecasts. However, buried on page 49 in the prospectus, WeWork admits that Adam Neumann gave interviews to Axios and Business Insider – both of which took place during the quiet period.

Does this matter? How serious is it?

SEC risk is very real

With regards to SEC regulations, this is more a violation of the letter of the law than its spirit. The point is management is not supposed to hype its stock and induce investors. The interviews that were given were probably an oversight more than anything else, and it would be difficult for the SEC to prove that investors were materially harmed by these interviews.

Situations like this tend to result in a slap on the wrist and a minor fine.

That doesn’t mean the transgression doesn’t matter. It’s a concern for investors.

WeWork Stock: big risk for investors?

The scandal shows that WeWork’s securities attorneys were lax in their oversight. That’s exactly the situation at Tesla, whose attorneys clearly cannot keep Elon Musk under control.

It’s indicative of a potentially damaging company culture. Investors do not want a loose cannon controlling the company and constantly testing the SEC.

Yet when combined in context with Adam Neumann’s questionable business transactions just prior to the IPO, it creates additional concern. Neumann sold some of his WeWork stock and used the proceeds to take out loans to buy more WeWork shares, but also invested in many other real estate assets. Neumann also acts as a landlord for other WeWork properties!

Ed Butowsky, managing partner of Chapwood Capital Investment Management, told CCN.com:

“That’s a red flag. You want your CEO fully invested alongside shareholders so interests are aligned. Does he believe in his own company or doesn’t he? Why is he making all these other investments when he should focus on just one: WeWork?”

One has to wonder, considering the company is going public on losses of $1.9 billion last year.

Investors should be cautious regarding this IPO, and keep a close eye on its CEO.