By: Ellen Cans
WeWork co-founder, Adam Neumann, is suing SoftBank for bailing out of a $3 billion stock buyout agreement. As reported by The New York Times, Neumann alleges that investor SoftBank breached its contract and was “secretly taking actions to undermine” the agreement. Neumann is hoping to combine the lawsuit with another case already opened by WeWork’s board in April. SoftBank, the Japanese tech giant led by Masayoshi Son, has argued that the claims in the suit are a “desperate and misguided attempt” to alter the deal’s history, as per The Verge.
Last October, SoftBank had agreed to bail out the struggling company, taking-over close to 80 percent. The deal included a plan to buy $3 billion worth of stock from Neumann and other shareholders. Roughly $970 million in stock would have been purchased from Neumann himself. Softbank, which was already WeWork’s largest stakeholder having previously invested over $10 billion, would write off billions of dollars on the investment, citing WeWork’s unprofitable and ill-advised operations. Last month, however, SoftBank scrapped the deal. SoftBank said that WeWork had failed to meet the conditions of its contract. It also alluded to legal inquiries by the US Department of Justice and the Securities and Exchange Commission.
WeWork shareholders dismissed SoftBank’s reasoning and called it a case of “buyer’s remorse”, and sued the Japanese multinational conglomerate for a “clear breach of its contractual obligations.” This latest lawsuit says that “Mr. Neumann put his trust in [SoftBank and SoftBank’s Vision Fund] to be stewards of WeWork, which he — and thousands of others — had worked so hard to build,” only to be met with “brazen” abuses, as per The Guardian. SoftBank defended its action, saying that “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.”
The current pandemic and its economic impacts have not been kind to most landlords, and Wework is no exception. The office-sharing giant, already had to deal with changes its management hierarchy, funding woes following the failed IPO, multiple lawsuits and now most offices are shuttered due to the notorious coronavirus. Further, as per the Verge its brand of shared workspaces could lose its luster altogether post- Covid-19. The company reportedly hasn’t paid April rent for some of its locations and has approached its landlords requesting rent stays or revenue-sharing agreements. Nevertheless, the company has attempted to keep many of its offices open, and continues to collect rent, despite the widespread shutdown.
