Beleaguered co-working company WeWork on Tuesday announced filing lawsuit against its biggest investor SoftBank after the latter pulled itself back from $3 billion tender offer. WeWork claimed it to be the breach of contract and fiduciary duty to the company’s minority shareholders. Softbank had last week said in a statement that its “offer for up to $3 billion worth of shares of WeWork held by other stockholders has ended because certain conditions to the tender offer were not satisfied.” Consequently, the “Special Committee of the Board of Directors of The We Company (WeWork)” filed the legal case in the Delaware Court of Chancery alleging that SoftBank has breached its obligations under the Master Transaction Agreement by failing to complete the tender offer, according to the WeWork statement.
WeWork claimed that SoftBank put its own interests ahead of those of WeWork’s minority stockholders and that it “engaged in a purposeful campaign to avoid completion of the tender offer” because of rising pressure from “activist investors,” the company said. For instance, WeWork alleged that SoftBank tried to thwart the “roll-up of WeWork’s joint venture in China” and later claimed the conditions to close the $3 billion tender offer were not fulfilled as this roll-up was among the requirement to be met.
A SoftBank spokesperson declined to comment for this story.
SoftBank had last week said that WeWork had failed to obtain the necessary antitrust approvals by April 1, 2020, sign and close the roll-up of the China joint venture by April 1, 2020; and close the roll-up of the Asia (ex-China and ex-Japan) joint venture by April 1, 2020, that were among the key “unfulfilled closing conditions.”
The crisis at WeWork began after the company filed its IPO prospectus last year that revealed $900 million loss that it incurred over six months along with questions raised around its corporate governance practices. In September last year, WeWork’s directors ousted its CEO and Co-founder Adam Neumann following the failed IPO attempt, Reuters had reported. SoftBank had announced $9.5 billion bailout package for WeWork in October of which this tender offer for $3 billion of WeWork shares was part of.
WeWork has now sought SoftBank to either fulfil the tender offer or compensatory damages for the alleged breach given that SoftBank has “already received most of the benefits provided to it under the MTA, including broad control of WeWork and additional economic benefits,” the statement added. Softbank had earlier claimed “the existence of multiple, new, and significant pending criminal and civil investigations” and “the existence of multiple new actions by governments around the world related to COVID-19, imposing restrictions against WeWork and its operations.”
“The tender offer was an offer to buy shares directly from other major stockholders and its termination has no impact on WeWork’s operations or customers. The tender offer closing was conditioned on the satisfaction of certain closing conditions the parties agreed to in October of last year for SoftBank’s protection,” Rob Townsend, Senior Vice President and Chief Legal Officer of SoftBank had said last week.