WeWork alleges that SoftBank breached its fiduciary duty to minority shareholders of WeWork by failing to act on the offer. SoftBank said last week that its decision to withdraw came from its own fiduciary duty to shareholders. SoftBank declined to comment on the lawsuit.
WeWork was put on a downward spiral after filing its IPO prospectus last year, which revealed a loss of $ 900 million over six months and questionable corporate governance practices. WeWork then withdrew its flyer and its CEO and co-founder Adam Neumann was ousted. Part of the takeover bid would have benefited shareholders, including Neumann, but it also included hundreds of millions for workers whose stock values had declined.
The company is seeking to require SoftBank to supplement its offer or pay compensatory damages, according to the announcement.
“SoftBank has already received most of the benefits that have been [Master Transaction Agreement], including broad control of WeWork and additional economic benefits, “said the special committee of the WeWork board of directors. SoftBank’s misconduct in refusing to complete the takeover bid deprives minority shareholders of WeWork of the liquidity that has been promised to them. “
WeWork says SoftBank deliberately entered into a separate transaction with minority investors in WeWork’s joint venture in China, both to dilute SoftBank’s ownership in the unit and to ensure that the original agreement would not be concluded before the 1st April. The company as an entity owned by SoftBank, as originally planned, has given SoftBank legal flexibility not to close the tender, says WeWork.
SoftBank cited new investigations into WeWork by government officials in the withdrawal of its takeover bid. Reuters announced in November that New York State Attorney General Letitia James is investigating the company. But the WeWork special committee said in its statement that SoftBank was aware of all the investigations when it signed the deal on December 27.
SoftBank has made a name for itself by spending cash at a rapid pace, but in the face of a global downturn, it will likely have to adjust its strategy. Just prior to the market liquidation, SoftBank Vision Fund director Rajeev Misra told CNBC that he expects dozens of companies in the fund’s portfolio to go public in the next 18 to 24 months. Now, these companies can put their plans on hold and turn to SoftBank for cash in order to carry them out in the coming months.
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