Former WeWork CEO Adam Neumann on Monday filed suit against SoftBank and its massive Vision Fund venture capital vehicle for withdrawing its $3 billion tender offer to his office sharing startup.
The lawsuit, filed in the Delaware Court of Chancery, alleges the Japanese conglomerate breached “contractual commitments and fiduciary duties,” and accuses it of “secretly taking actions to undermine the agreement,” CNN reported.
The offer was part of a $9.6 billion rescue package agreed to in October that gave SoftBank control of WeWork after its disastrous IPO attempt last year.
SoftBank backed out of the agreement on April 1, saying that WeWork had not met some of the outline’s preconditions, including a failure to secure antitrust approvals and pending criminal and civil investigations, SoftBank said in a statement.
The statement said that Neumann, his family and other large shareholders would profit most from the tender offer, not WeWork employees.
Tender offers are a way to publicly take over a firm by buying shareholders’ shares, usually for a specific price and during an allotted time frame.
“SoftBank will vigorously defend itself against these meritless claims,” Rob Townsend, SoftBank’s chief legal officer, said in a statement. “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.”
SoftBank has seen huge losses due to the coronavirus pandemic, and WeWork has seen its occupancy rate plunge.
WeWork’s board sued SoftBank in a separate lawsuit over the aborted deal last month. Monday’s lawsuit seeks to combine the two cases.
Neumann, who was born in Israel and partially raised on a kibbutz, had taken the tech startup world by storm with his company, but rising losses and management chaos led to negative exposure and a ruinous, aborted IPO attempt late last year.
The firm had been considered one of the most highly valued startups in the US, and was worth $47 billion at one point. When it agreed to the SoftBank bailout its valuation stood at around $8 billion.
WeWork mostly makes money by leasing buildings and subdividing them into office space that it sublets on a short-term, flexible basis.
Neumann had dazzled private investors with his vision of creating workspaces that fostered communality and catered to the overall well-being of its members.
Neumann was forced out as chief executive in September 2019 as the company’s value plummeted and amid heavy criticism of his behavior and management. In October 2019 WeWork was taken over by SoftBank, which spent over $5 billion on the move. Neumann walked away with nearly $2 billion.