- The owner of WeWork, The We Corporation, sued SoftBank Group, challenging the decision of its largest shareholder to terminate a $3 billion offer for shareholdings in the office-space sharing business.
The owner of WeWork, The We Corporation, sued SoftBank Group, challenging the decision of its largest shareholder to terminate a $3 billion offer for shareholdings in the office-space sharing business.
The complaint was brought by an independent two-member special committee of The We Company’s board, alleging SoftBank had violated its contractual obligations by dropping the tender offer.
“The Special Committee recognizes that SoftBank seeks to put its own interests ahead of those of WeWork’s minority stockholders,” it said in the complaint brought before Delaware’s Chancery Court.
Last week, SoftBank said the planned tender for additional WeWork shares was terminated, citing criminal and civil investigations in the company, its inability to restructure a joint venture in China and the effects of the coronavirus pandemic.
The epidemic has struck WeWork especially hard, as its occupancy rates have plummeted over the past month, prompting its largest clients to vacate.
However, WeWork has said it has ample funds and financial resources to execute its five-year plan and handle the challenges raised by the coronavirus crisis.
In the case, which was widely anticipated after the tender offer came through, the Special Committee called SoftBank’s decision to terminate the tender offer “false” and claimed SoftBank had violated its Master Transaction Agreement (MTA) obligations.
“The failure of SoftBank to fulfill the tender offer is a direct violation of its MTA contractual obligations as well as a violation of SoftBank’s fiduciary obligations to WeWork’s minority shareholders, including hundreds of current and former employees,” said the Special Committee.
The tender offer, which would have benefited only a small group of shareholders, including ousted co-founder Adam Neumann, was accepted in October as part of SoftBank’s bailout package after WeWork’s IPO plans had imploded.
Investors were worried about the losses of the group, Neumann’s leadership style, and a business model involving long-term leases and short-term room rentals.
In October, WeWork formed a two-member special committee to help SoftBank and its primary shareholder JPMorgan Chase & Co negotiate a funding lifeline.
The committee features Bruce Dunlevie, a general partner at WeWork shareholder Benchmark Capital, and Lew Frankfort, the former CEO of Coach’s luxury handbag manufacturer.
The special committee called on SoftBank in Tuesday’s statement to complete the tender offer or to accept alternative compensatory damages for “contract violations and fiduciary duty.”