WeWork co-founder Adam Neumann is suing investor SoftBank for scrapping a $3 billion stock buyout agreement. The New York Times reports that Neumann accused SoftBank of breaching its contract and “secretly taking actions to undermine” the agreement, which SoftBank abandoned last month. He’s looking to merge the case with a similar suit by WeWork’s board in April, but SoftBank has called those claims a “desperate and misguided attempt” to rewrite the deal’s history.
SoftBank agreed to bail out The We Company last year while writing off billions of dollars on an investment due to WeWork’s unprofitable and ill-advised operations. The deal included a plan to buy $3 billion worth of stock from Neumann and other shareholders. But in April, SoftBank backed out, saying that WeWork hadn’t met the conditions of its contract. It also cited legal inquiries by the US Department of Justice and the Securities and Exchange Commission. Neumann himself planned to sell $970 million in stock.
WeWork shareholders accused SoftBank of “buyer’s remorse” and sued for a “clear breach of its contractual obligations.” According to The Guardian, this latest lawsuit says that “Mr. Neumann put his trust in [SoftBank and SoftBank’s Vision Fund] to be stewards of WeWork, which he — and thousands of others — had worked so hard to build,” only to be met with “brazen” abuses.
SoftBank, conversely, said that “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.”
These suits don’t necessarily help WeWork’s actual financial situation, which was shaky even before the novel coronavirus devastated the world economy. The company reportedly missed rent in some locations last month, and its brand of shared workspaces could translate poorly to a post-pandemic world. Nonetheless, it has attempted to keep offices open, even as governments have required many workers to stay home.