WeWork Cofounder Adam Neumann Sues Onetime Ally SoftBank Over Abandoned $3 Billion Buyout




Adam Neumann just declared war on SoftBank.

The WeWork cofounder and former CEO filed suit against the conglomerate founded by Masayoshi Son, once his most powerful cheerleader, within the Delaware Court of Chancery on Monday night. The move adds Neumann to a legal scrum that began when a special board committee filed an identical lawsuit on behalf of The We Company last month. Neumann’s suit includes a motion to consolidate the 2.

The complaint is that the first public glimpse of Neumann’s intentions since he was pushed out as CEO in September after the company’s failed public offering. The suit, unthinkable just six months ago, is that the latest twist in an unraveling drama that has engulfed the corporate.

At issue is SoftBank’s April 1 decision to abandon plans to get $3 billion worth of WeWork shares from minority investors. The offering was a part of a bailout package extended to WeWork in October after the failed IPO. Canceling it prevented Neumann from collecting the maximum amount as $970 million from the sale of shares to the japanese investor.

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 offering.

“After capture of WeWork and also the Board, SBG and SBVF reneged on their promise to get hold of the advantages they'd already received,” the complaint reads, bearing on SoftBank Group and SoftBank’s Vision Fund. As a motive, the complaint points to SoftBank’s “deteriorating” 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 offering during which Mr. Neumann—the biggest beneficiary—sought to sell nearly $1 billion available.”

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 corporate in 2010 with Miguel McKelvery. The investor led two more massive funding rounds that valued WeWork at $47 billion and Neumann’s stake at over $4 billion in January 2019, and funded the company’s unsustainable—and rapid—expansion.

“You and Miguel don't seem to be 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 corporate because it accumulated enormous losses and also 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 ultimate straw.

In need of capital, WeWork’s board voted to travel with SoftBank’s bailout rather than a competing $5 billion debt package from JPMorgan JPM. The SoftBank deal matched JPMorgan’s on corporate debt but was far more favorable to Neumann personally due to the offering, a $180 million consulting fee and a $500 million credit line to pay off other debt.

Neumann has not spoken publicly since his ouster and has spent much of the last several months in Israel, where he grew up. Back in big apple, a revolving door of executives led by WeWork executive chairman Marcelo Claure, who is additionally chief operating officer of SoftBank, attempted to stabilize WeWork. the corporate has laid off over 2,650 employees, including many last week, while businesses and buildings acquired in flusher times are sold off.

By mid-March, because the coronavirus outbreak gained devastating momentum and left many WeWork locations empty, Son notified investors that SoftBank had grounds to renegotiate the offering, pointing to unmet conditions, including ongoing regulatory investigations into WeWork and failure to consolidate its China business. Minutes after the April 1 deadline, SoftBank informed investors it might not move forward with the offering.

On April 7, longtime board members Bruce Dunlevie of Benchmark and Lew Frankfort, the previous CEO of Coach, filed a suit in Delaware’s Court of Chancery on behalf of all minority shareholders. they create up a special committee, originally formed to assess the competing bailout offers from SoftBank and JPMorgan.

That suit alleges SoftBank executives took steps to sabotage the buyout as soon because the original agreement was signed. Benchmark, which owns 8% of WeWork, could have made over $350 million within the offering, in step with a document reviewed by Forbes. SoftBank has questioned Dunlevie and Frankfort’s motives and right to file a suit, calling it a “misguided attempt now to rewrite that agreement and to rewrite the history of the past six months.