A group of WeWork board members sued SoftBank to force the Japanese conglomerate to go through with an abandoned $3 billion payment to WeWork’s shareholders.
The complaint, filed in the Delaware Court of Chancery on Tuesday by a special committee of the WeWork board on behalf of The We Company, is the first of several legal actions people close to the company expect could be launched against SoftBank.
Earlier this month, SoftBank told WeWork it would not complete a tender offer, announced in October as part of a bailout package following WeWork’s failed IPO, through which SoftBank would have purchased stock from minority shareholders. SoftBank pointed to conditions not met by the company, including a planned roll-up of its China business and ongoing regulatory investigations.
Others expected to take legal action include Adam Neumann, WeWork’s cofounder and former CEO, who could have sold almost $1 billion worth of shares in the tender offer, and current and former WeWork employees, up to 2,000 of whom were expecting paydays totaling $450 million.
A fight between shareholders and WeWork’s biggest backer is among several existential threats the office-space giant is facing. Mounting losses are likely as the coronavirus outbreak has forced the global workforce to work from home, leaving WeWork’s hundreds of locations empty. The company, which lost $2.2 billion in the first nine months of 2019, is seeking to renegotiate leases with its landlords across the globe.
In addition, WeWork may no longer receive a much-needed $1.1 billion debt facility that SoftBank promised contingent on the tender offer closing.
The special committee, consisting of longtime board members Bruce Dunlevie of Benchmark Capital and Lew Frankfort, former CEO of Coach, accused SoftBank of sabotaging WeWork’s ability to meet the conditions of the tender offer and said it was in “clear breach of its contractual obligations.”
“The Special Committee regrets the fact that SoftBank continues to put its own interests ahead of those of WeWork’s minority stockholders,” the directors added in the statement on Tuesday morning.
In the complaint, the special committee argues that SoftBank and its chief executive Masayoshi Son (whom Forbes recently profiled) started questioning whether to go through with the tender offer shortly after the agreement. By November, SoftBank had control of the WeWork board and the right to appoint a new CEO, which it did in February. “Company employees, who had been counting on the Tender Offer in difficult economic times, were left without an opportunity to receive value for their shares,” the special committee wrote in the complaint.
In a statement emailed to reporters Tuesday afternoon a spokesperson for SoftBank wrote, “Nothing in the Special Committee’s filing today credibly refutes SoftBank’s decision to terminate the tender offer.” Continuing, “Their filing today is a desperate and misguided attempt now to rewrite that agreement and to rewrite the history of the past six months.”