WeWork’s co-founder and former chief executive Adam Neumann sued SoftBank Group Corp., accusing the Japanese technology group of breaking a key provision of a deal that gave SoftBank control of the shared-office-space company. The civil complaint, filed in Delaware’s Chancery Court, is the latest legal tussle over SoftBank’s multibillion-dollar rescue of We Co., the parent of WeWork, and caps the dramatic falling out of SoftBank founder Masayoshi Son and Mr. Neumann.
Tokyo-based SoftBank in April terminated an offer to pay up to $3 billion for shares in WeWork, saying conditions to complete the stock sale weren’t met by an April 1 deadline. As part of that deal, which led to Mr. Neumann’s ouster from the company’s board, Mr. Neumann had the right to sell up to $970 million in stock to SoftBank.
The suit alleges that SoftBank took steps to undermine the deal as early as December 2019 by preventing a roll-up of WeWork’s China business from closing, which was a prerequisite to the tender offer. “After gaining control of WeWork and the Board, SBG and SBVF reneged on their promise to pay for the benefits they had already received,” the complaint reads, referring to SoftBank Group and SoftBank’s Vision Fund. As a motive, the complaint points to SoftBank’s “deteriorating” financial condition.
SoftBank’s chief legal officer, Rob Townsend, called the claims “meritless” and said, “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 two companies have had a whirlwind romance. SoftBank invested $3 billion in WeWork in March 2017 after a 12-minute meeting between Son and Neumann, who founded the company in 2010 with Miguel McKelvery. The investor led two more massive funding rounds that valued WeWork at $47 billion and Neumann’s stake at more than $4 billion in January 2019 and funded the company’s unsustainable—and rapid—expansion. “You and Miguel are not crazy enough,” Son told Neumann at the time of his first investment.
In September, WeWork’s board removed Neumann as CEO. He had overseen the company as it accumulated enormous losses and the failed public offering exposed widespread corporate governance issues. A Wall Street Journal report documenting Neumann’s marijuana use and other questionable acts was the final straw.
Todd “Bubba” Horwitz
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