The co-founder and former chief executive of WeWork, Adam Neumann, has filed a lawsuit against SoftBank over the withdrawal of a $3 billion tender offer.
The case, filed in Delaware on Monday, accuses Japanese conglomerate SoftBank and the firm's investment arm, the Vision Fund, of "breaching contractual commitments and fiduciary duties."
SoftBank's tender offer was signed in October 2019 as part of a rescue package for the failing shared workspace company. The $3 billion offer was withdrawn in April.
SoftBank cited closing conditions that had not been met as the reason for the decision. At the time, SoftBank said that necessary antitrust approvals had not been secured, the agreed closure of joint ventures in Asia had not been finalized, and "new and significant pending criminal and civil investigations" launched after the signing of the tender offer forced SoftBank to rethink the cash injection.
SoftBank and the Vision Fund have previously committed over $14.25 billion to WeWork. Following a failed initial public offering (IPO), Neumann resigned as CEO.
WeWork's valuation, once pegged at $47 billion, is now considered to be closer to $8 billion. The company is now struggling further due to a plummet in demand caused by the coronavirus pandemic and the closure of office spaces.
The decision to withdraw the tender offer means that shareholders, including Neumann, will not receive the payouts they were expecting. Neumann and Benchmark Capital were due to profit the most, as SoftBank says their shares represented over half of those included in the agreement.
According to the lawsuit, SoftBank and the Vision Fund have conducted "brazen abuses," and as such, legal action was the remedy selected by "a special committee of WeWork's board."
Last month, the special committee filed a separate lawsuit against SoftBank, claiming the termination of the tender offer was unacceptable and a case of "buyer's remorse," as noted by CNN.
SoftBank intends to fight Neumann's lawsuit.
Rob Townsend, Senior Vice President and Chief Legal Officer of SoftBank, said in a statement:
"SoftBank will vigorously defend itself against these meritless claims. Under the terms of our agreement, which Adam Neumann signed, SoftBank had no obligation to complete the tender offer in which Mr. Neumann -- the biggest beneficiary -- sought to sell nearly $1 billion in stock."
In April, SoftBank founder and CEO Masayoshi Son said he believes at least 15 companies operating under the Vision Fund will go bankrupt, in part due to disruption caused by COVID-19. The Vision Fund is also expected to report close to $17 billion in losses over the financial year.
To offset SoftBank's losses and poor financial results, the company has launched a $41 billion share buyback program and will sell off assets to fund the scheme.
Previous and related coverage
- SoftBank Vision Fund: 15 companies expected to go bankrupt
- SoftBank launches $41 billion share buyback, debt reduction scheme
- SoftBank sees ¥700 billion loss from WeWork investment
Have a tip? Get in touch securely via WhatsApp | Signal at +447713 025 499, or over at Keybase: charlie0