WeWork co-founder Adam Neumann has filed a lawsuit against Japanese conglomerate SoftBank for bailing out of $3 billion share buyout agreement.
Adam Neumann filed the lawsuit against SoftBank in the Delaware Court of Chancery on Monday. arguing that the Japanese conglomerate was "breaching their contractual commitments and fiduciary duties" by abandoning a $3 billion deal with WeWork.
According to a representative for Neumann, the WeWork co-founder accuses SoftBank and its SoftBank Vision Fund of "secretly taking actions to undermine" the share buyout agreement before walking away from the deal on April 1.
The bailout agreement
The lawsuit stated that the said agreement is a tender offer which was part of a rescue package agreed to by the two companies late last year. SoftBank stepped in with the roughly $10 billion package after WeWork failed with its initial public offering (IPO) and almost faced insolvency.
Under the agreement, WeWork’s potential valuation would significantly fall from its peak of $47 billion to around $8 billion. Following the failure of its IPO, the We Company was considering two financing options to avoid running out of money, one was the takeover and the other was a possible loan package put together by JPMorgan Chase.
The company's valuation fell from as high as $47 billion to $8 billion when the bailout agreement was formed in October.
Last year, Neumann resigned as chief executive officer (CEO) of the office leasing firm and stepped down from the company's board
The lawsuits
In early April, a similar lawsuit was filed by WeWork and according to the special committee of the company’s board, SoftBank and its CEO Masayoshi Son are now suffering from “buyer’s remorse.”
In response to the suit, SoftBank released a statement calling it “a desperate and misguided attempt” to rewrite last year’s agreement. The conglomerate emphasized again that the share purchase was subject to certain conditions.
SoftBank identified several reasons why WeWork failed to fulfill the conditions required for the agreement’s completion.
These include the existence of pending criminal and civil investigations into the company, global restrictions related to Covid-19 that are affecting its operations, and the failure to restructure a joint venture in China.
Meanwhile, Neumann's case accuses SoftBank and the Vision Fund of "undermining" the joint venture in China by pressuring its investors not to waive certain rights which would permit it to undergo restructuring.
Responding to Neumann's case, Rob Townsend, the Japanese conglomerate's chief legal officer, said: "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."
Neumann is suggesting that the two lawsuits be combined.
SoftBank is facing the lawsuits amidst massive losses on some of its biggest investments, including WeWork, while also dealing with the economic fallout from the coronavirus pandemic.
Last week, SoftBank released a widened forecast for the year ended in March, bringing the expected net loss to $8.4 billion, of which $6.6 billion of the loss will be coming from its investment in WeWork alone.
