Adam Neumann, co-founder of WeWork, filed a lawsuit on Monday against Japan's SoftBank Group and its Vision Fund for backing out of a $3 billion tender offer to shareholders of the office-sharing company.
The offer was part of a $9.6 billion financing bailout program SoftBank negotiated in October with WeWork and gave it control over the company. The occupancy rates of WeWork have since plummeted amid the coronavirus pandemic.
Neumann, who had been terminated from his post in September following the tumultuous failure of WeWork's proposed public float, filed the charges in the US state of Delaware alleging that the Japanese investment firm has "brazenly abused its power to renege" on the promised acquisition.
SoftBank withdrew from the agreement early last April, saying WeWork had failed to meet key requirements including obtaining regulatory approvals and closing operations in China.
Upon gaining control of WeWork and the Board, SBG and SBVF backtracked on their pledge to pay for the benefits they had already earned, reads the lawsuit, referring to SoftBank Group and SoftBank's Vision Fund. The lawsuit points to the worsening financial situation of SoftBank as a motive.
An independent special committee made up of Bruce Dunlevie, who is a general partner at WeWork shareholder Benchmark Money, and Lew Frankfort, former chief executive officer of luxury handbag manufacturer Coach, have lodged a lawsuit calling SoftBank's move to abandon the tender offer as unjust.
Lawyers at SoftBank had challenged the right of the special panel to represent minority stakeholders, a claim dismissed by the committee last April.
The lawsuit also alleges that SoftBank han no intention to go proceed with the agreement because its of its "deteriorating" financial situation, citing a credit standing downgrade from Moody's last March.
In reaction, SoftBank chief legal officer Rob Townsend said they will "vigorously defend itself" versus these meritless accusations.
The two companies have had a stormy relationship. In March 2017, after a 12-minute meeting between Son and Neumann, who created the company with Miguel McKelvery in 2010 SoftBank invested $3 billion in WeWork.
The investor led two more major financing rounds, which in January last year priced WeWork at $47 billion and Neumann's stake at more than $4 billion, and enabled the unsustainable - and rapid - expansion of the business.
WeWork's board of directors ousted Neumann as chief executive as the company suffered huge losses and the failed public offering exposed massive corporate management issues.
