The co-founder and former CEO of WeWork has announced plans to sue Japanese VC giant SoftBank, the biggest investor in the coworking space startup.
Adam Neumann, who co-founded WeWork in 2010 and stepped down as chief executive in September last year following a failed IPO bid, has filed the lawsuit against SoftBank over the termination of a $US3 billion rescue package for WeWork.
In the filing in a Delaware court, Neumann accused SoftBank of abusing its power in its decision to terminate the agreement to buy the $US3 billion in stocks from WeWork’s early investors, claiming the Japanese firm was “secretly taking actions to undermine the deal”.
Neumann had stood to benefit the most from the rescue deal, with plans to sell $US970 million worth of shares in WeWork.
“Mr Neumann put his trust in [SoftBank and the Vision Fund] to be stewards of WeWork, which he – and thousands of others – had worked so hard to build,” the lawsuit said.
“The abuses committed by [SoftBank] and SoftBank Vision Fund are so brazen that they have prompted legal action by a special committee of WeWork’s board.”
Neumann has pushed for his case to be merged with a similar lawsuit launched by WeWork’s board last month, with shareholders accusing SoftBank of experiencing “buyer’s remorse” and a “clear breach of its contractual obligations”.
Adam Neumann, the former CEO of WeWork. Photo: Shutterstock
SoftBank has hit back at Neumann’s lawsuit’s claims, labelling them “meritless”.
“SoftBank will vigorously defend itself against these meritless claims,” SoftBank chief legal officer Rob Townsend said.
“Under the terms of our agreement, which Adam Neumann signed, SoftBank had no obligation to complete the tender.”
SoftBank also rejected claims made in the lawsuit by WeWork’s shareholders, saying it was a “desperate and misguided attempt” to “rewrite” the rescue package agreement.
SoftBank announced plans for a massive rescue package for WeWork late last year, with the shared office space company on the verge of collapse after failing in its attempts to go public earlier in 2019.
But SoftBank announced last month that it had “no choice” but to back out of this deal, saying that WeWork had failed to meet several conditions of the agreement.
The investment firm also referenced “multiple, new and significant pending criminal and civil investigations”, as contributing to the decision to ditch the rescue package.
SoftBank also pointed to WeWork’s failure to restructure a joint venture in China and the impact of the ongoing COVID-19 pandemic as reasons behind it pulling the funding offer.
WeWork’s troubles began last year after it announced plans for a massive IPO.
Its subsequent financial filings revealed large financial losses, with concerns also emerging around its corporate governance and culture.
At the time, WeWork was valued at $US47 billion, despite losing $US3 billion in the past three years.
The filings also revealed that Neumann was renting his own buildings to WeWork and had secured loans from the company.
WeWork was eventually forced to ditch the IPO plan, with Neumann resigning as chief executive in September.
By September last year, WeWork’s valuation had plummeted to $US10 billion. SoftBank itself took a $US6.7 billion hit on its investment in the company, with its boss Masayoshi Son saying he had made a mistake, labelling it a “very harsh lesson”.