A special committee of WeWork board members launched a legal challenge on Tuesday to SoftBank’s withdrawal from a $ 3 billion deal, as part of what is expected to be the first of several legal disputes over the deal’s decision. Japanese group to withdraw from a previously agreed share buyback.
Court case against SoftBank and its Saudi-backed Vision Fund, filed in Delaware court, said the group had “waged a deliberate campaign to avoid the finalization of the tender offer” .
The $ 3 billion deal was just part of a multi-billion dollar bailout that SoftBank negotiated with WeWork last fall, which injected $ 1.5 billion in capital. emergency in the office company and provided new debt to avoid impending insolvency.
The lawsuit represents an escalation of hostilities between two of the shareholders who helped make WeWork one of the most popular companies in the world before its crash of last year, when an initial public offering failed left the company in the dark. spend high with just a few weeks of cash and reset its valuation from $ 47 billion to less than $ 10 billion.
The special committee includes Bruce Dunlevie of Benchmark Capital, which reinforced WeWork’s claim to be a tech company when it became the first Silicon Valley investor to support Adam Neumann’s start-up in 2011. The Another member of the committee, the president of the coach, Lew Frankfort, is another longtime member. Member of the board of directors and shareholder of WeWork.
“SoftBank’s failure to comply with the public offer offer constitutes a manifest violation of its contractual obligations [master transaction agreement] as well as a breach of SoftBank’s fiduciary obligations to minority shareholders of WeWork, including hundreds of current and former employees, “the committee said in a statement.
SoftBank’s legal argument is based on a provision of the rescue agreement, which allowed it to withdraw from share purchases if SoftBank, the Vision Fund or WeWork were faced with “material responsibility” during investigations into the company and its co-founder Adam Neumann, who intervened. last year.
The special committee said that none of the investigations into WeWork and its behavior, which includes an investigation by the Securities and Exchange Commission, would result in material responsibility for the company. She added that SoftBank was aware of all the investigations when it amended its rescue agreement in December.
The $ 3 billion deal was also contingent on regulatory approval and separate deals involving two WeWork joint ventures in Asia.
“None of the conditions listed by SoftBank gave it a legitimate basis to end the takeover offer,” wrote attorneys for Wilson Sonsini, who represents the committee, in their complaint.
How a judge interprets these provisions and determines the potential material damage will decide the fate of the prosecution.
The legal battle between the main shareholders of WeWork has broken out as the economic turmoil triggered by the coronavirus pandemic puts new pressure on its activity.
Most of the group’s tenants are on short-term rentals, which allows them to leave in the event of a recession, and thousands have already withheld rent or announced to the company that they plan to terminate their lease, according to people aware of the details.
The company, which had $ 4.4 billion in cash and commitments at the end of last year, also lost access to $ 1.1 billion in debt financing that was contingent on the completion of the loan. ‘take-over bid. Lawyers for the special committee said WeWork could be “further threatened by losing access to this potential source of funding.”
SoftBank and the Vision Fund declined to comment.