WeWork co-founder Adam Neumann sued SoftBank, its biggest investor, over the Japanese company’s decision to scuttle a $3-billion deal to buy stock from employees and other shareholders.
Neumann, who was set to reap the biggest windfall from the transaction, contends that SoftBank Group Corp. and its Vision Fund relied on legally faulty pretexts to renege on its agreement to buy the office-sharing company’s stock as the conglomerate’s financial position weakened, according to a copy of the complaint reviewed by Bloomberg. The lawsuit, submitted to Delaware Chancery Court, couldn’t immediately be verified on the docket.
Rob Townsend, the chief legal officer at SoftBank, described the claims as “meritless” in an emailed statement. “Under the terms of our agreement, which Adam Neumann signed, SoftBank had no obligation to complete the tender offer,” Townsend wrote.
The stock deal was part of a bailout package from SoftBank after WeWork’s initial public offering failed last year. Neumann, the controversial face of the business, agreed to leave the board and, in return, would be able to sell as much as $970 million in stock to SoftBank. The exit package for Neumann outraged employees, thousands of whom were set to lose their jobs. SoftBank’s decision last month to abandon the deal further rankled staff who had been counting on selling stock.
Two independent WeWork directors then sued the Japanese conglomerate, arguing that SoftBank didn’t hold up its end of the deal and was experiencing “buyer’s remorse.” SoftBank called the suit a needless use of company money and said at the time that it anticipated a separate suit from Neumann. A spokesman for Neumann said he will ask the court to consolidate his case with the one from the two directors.
SoftBank has said WeWork failed to meet requirements for the deal to move forward, citing regulatory concerns and a handful of government investigations into the company, including from the U.S. Securities and Exchange Commission and the Justice Department. Neumann claims that while SoftBank was obligated under the purchase agreement to use “its best efforts” to complete the tender offer, it was “secretly taking actions to undermine it,” according to the copy of the complaint.