- Adam Neumann, the co-founder of WeWork, sued SoftBank Group Corp., its biggest investor, over the decision of the Japanese firm to cancel a $3 billion offer
Adam Neumann, the co-founder of WeWork, sued SoftBank Group Corp., its biggest investor, over the decision of the Japanese firm to cancel a $3 billion offer to purchase shares from workers and other shareholders, which was part of an attempt to save the troubled business at work.
According to a copy of the lawsuit reviewed by Bloomberg, Neumann, who was expected to reap the greatest windfall from the sale, says SoftBank and its Vision Fund relied on legally dubious pretexts to renege on an agreement to buy the shares as the financial condition of the company weakens. The case, filed in the Court of Delaware Chancery, could not be checked on the docket immediately.
In an emailed statement, Rob Townsend, SoftBank’s chief legal officer, characterized the allegations as “meritless.” “Under the terms of our agreement signed by Adam Neumann, SoftBank has no obligation to complete the tender offer,” Townsend said.
The equity offering as part of SoftBank’s bailout package after the original public bid for WeWork collapsed last year. Neumann, the company’s notorious face, decided to leave the board and could sell as much as $970 million in shares to SoftBank, in return.
Neumann’s exit program angered workers, with thousands expected to lose their jobs. Last month’s decision by SoftBank to abandon the deal listed further staff who had been counting on selling stock.
Two independent WeWork directors then sued the Japanese conglomerate, alleging that SoftBank did not hold up its end of the bargain and was feeling “buyer’s remorse.” SoftBank called the suit a wasteful use of corporate resources and said at the time that it expected a separate suit from Neumann. A Neumann spokesman said that he would ask the court to merge its case with the complaint of the directors.
SoftBank said WeWork failed to meet the clear requirements of the agreement to move forward, citing regulatory issues and a number of government investigations into the company, including from the U.S. The Securities and Exchange Commission, and the United States Department of Justice;
SoftBank projected a larger loss for the fiscal year ending in March last week, saying it now expects to lose 900 billion yen ($8.4 billion), after previously forecasting its net loss would be about 750 billion. The WeWork-related hit accounts for the non-operating losses of around 700 billion yen including investment and loan commitments.
The company is expected to post final results on May 18th for the fiscal year.
Neumann said in the complaint that he stepped down as the chief executive of WeWork and relinquished ownership of the company to SoftBank in exchange for the stock buy and vowed to fund it. According to court filings, SoftBank quickly stepped in and took ownership of WeWork’s parent company, We Co ..
Then SoftBank officials went to work attempting to thwart the transaction by stopping a Chinese unit’s “roll-up,” one of the conditions, according to the suit, for completing the stock buyout. As SoftBank was expected to make reasonable efforts to complete the tender offer, the Japanese firm was “secretly taking steps to circumvent it,” Neumann said in the lawsuit.
Neumann is asking a judge from Delaware to order SoftBank to meet its commitments to purchase the stock and to pay restitution for its wrongdoing. Neither judge has yet been appointed to the case, but Chief Judge Andre Bouchard is handling the WeWork directors’ earlier litigation The case is Neumann v. Softbank Group Corp, Delaware Chancery Court (Wilmington).