October 28, 2021

The Queens County Citizen

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Adam Neumann sued SoftBank for leaving behind a $ 3 billion purchase of WeWork shares

SoftBank funds tech giants. But they're not all successes
The lawsuit, filed at the Delaware Court of Chancery on Monday and shared with CNN Business by representatives for Neumann, accused SoftBank and SoftBank’s Vision Fund of “secretly taking action to undermine” the share purchase agreement before resigning on April 1.
According to the lawsuit, the tender offer was part of a rescue package approved at the end of last year, when WeWork’s IPO, which failed to leave office-sharing startups, stumbled on the edge of bankruptcy – until SoftBank came in with a bailout, worth about $ 10 billion at a time.

Neumann resigned as CEO of WeWork and resigned from the company’s board last year after overseeing efforts that were disastrous for the company. The much-awaited IPO of the shared workspace provider was canceled after investors rejected his assessment and criticized the company’s governance.

The WeWork valuation, which has ballooned to $ 47 billion at one point, fell to around $ 8 billion when the SoftBank bailout was agreed in October.

SoftBank (SFTBF) walked away from the agreement in early April, saying share purchases were subject to certain conditions which were not met. The Japanese company was stated in a statement at the time several ways that WeWork failed to meet these requirements, including the existence of a pending criminal and civil investigation into the company, global restrictions related to coronaviruses that affect WeWork operations and failure to restructure a joint venture in China. WeWork declined to comment at the time, but the company’s special board committee said it was “shocked and disappointed” with SoftBank’s decision, adding that it would evaluate all legal options. The committee filed a lawsuit against SoftBank last month.

Neumann’s lawsuit accuses SoftBank and the Vision Fund of “undermining” joint ventures in China by pressuring its investors not to neglect certain rights that would allow restructuring to take place.

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“SoftBank will steadfastly defend against this inappropriate claim,” Rob Townsend, chief legal officer of the Japanese conglomerate, said in a statement. “Under the terms of our agreement, signed by Adam Neumann, SoftBank has no obligation to complete the tender offer in which Mr. Neumann – the largest beneficiary – is trying to sell nearly $ 1 billion in shares,” he added.

SoftBank warned of steeper losses because it needed $ 6.6 billion in hits on WeWork
Neumann’s suit follows one that was filed last month by the WeWork board’s special committee, which said SoftBank and its CEO, Masayoshi Son, suffered “buyer regret.” SoftBank called the lawsuit “a desperate and mistaken attempt” to rewrite the agreement last year, stressing again that the purchase of shares is subject to certain conditions.

Neumann requested that the two lawsuits be combined. WeWork declined to comment on Neumann’s lawsuit.

The lawsuit came when SoftBank faced huge losses on some of its biggest bets, including WeWork, and wrestled with the economic impact of the coronavirus pandemic. The Japanese company last week widened its forecast for net losses in the year ending March to $ 8.4 billion, saying it expected to lose $ 6.6 billion from investment in WeWork alone.

– Sherisse Pham and Sara O’Brien from CNN contributed to this report