WeWork Sues Softbank for Dropping US$3 Billion InvestmentBy MBN Staff | Wed, 04/08/2020 - 11:50
It all started earlier this year when Softbank said it would inject billions into WeWork, bringing its total investment in the startup to more than US$10 billion. Now, the deal is nearly gone while little is left of the WeWork people knew two years ago, once admired as a unicorn valued at US$47 billion.
Yesterday, the story took a dramatic turn when WeWork sued SoftBank alleging the investment group violated its contractual obligations by backing out of a US$3 billion rescue plan. Just a few days after Softbank said it was no longer planning to buy WeWork shares to shore up its finances, the Japan-based technology investment fund shared this bad news.
"This is a clear breach of Softbank's contractual obligations," the WeWork board of directors said in the lawsuit. It also characterized SoftBank's action as a breach of SoftBank's fiduciary obligations to current and former employees of the company who were to sell their assets. In the lawsuit, WeWork is asking the court to compel SoftBank to comply with the settlement or pay for damages.
WeWork executives also accuse Softbank of withdrawing from the deal when it "has already received most of the benefits," such as controlling the WeWork board. All of this because the Japanese company "yielded to pressure from investors."
SoftBank said it was terminating the agreement, declaring WeWork unable to meet its obligations and recalled "multiple, new and significant pending criminal and civil investigations" surrounding WeWork and its co-founder Adam Neumann, who would have received an estimated US$1 billion from the investment.
If the public offering had been completed, Softbank, which is WeWork's largest shareholder, would have owned approximately 80 percent of the office-sharing company. SoftBank has invested more than US$13.5 billion in WeWork.