SoftBank Says Neumann Plans to Sue Over Failed WeWork Deal
Neumann was set to sell as much as $970 million in shares as part of the scrapped offer.
(Bloomberg) -- WeWork co-founder and former Chief Executive Officer Adam Neumann intends to file suit against SoftBank Group Corp. for reneging on a $3 billion offer to buy shares in the co-working company, according to a letter from the Japanese investor’s attorney.
The statement came in an April 17 email to the board of We Co., in which SoftBank’s lawyer said that a similar lawsuit filed earlier this month by a special committee -- consisting of two independent directors -- lacked authority.
“Adam Neumann has also said that he intends to file a complaint,” Morrison Foerster’s Erik Olson wrote, according to the letter seen by Bloomberg News. “There is no need for WeWork to allow its cash reserves to be used to finance an expensive lawsuit intended to generate material personal benefits for the Special Committee directors and the funds they control.”
Attorneys representing Neumann have sent a letter to SoftBank reserving his rights, a person familiar with the matter said. Neumann was set to sell as much as $970 million in shares as part of the scrapped offer.
The special committee members -- investor Lew Frankfort and Benchmark Capital’s Bruce Dunlevie -- filed suit on April 7 over the failed stock purchase, which stopped WeWork from being able to access $1.1 billion in new debt financing from SoftBank.
Benchmark tendered shares with a gross value of about $627 million into the abandoned offering, while entities linked to Frankfort together tendered shares worth $40.3 million, according to the letter. The Japanese conglomerate asked the board to “move quickly to confirm” that the special committee isn’t authorized to act on behalf of WeWork.
That SoftBank would seek to limit the committee shows it “has no concept of governance best practices under Delaware law,” David Berger, a Wilson Sonsini Goodrich & Rosati partner representing WeWork’s special committee, wrote in an emailed response to the We Co. board on Monday. Berger called “frivolous” the assertion that Dunlevie and Frankfort were conflicted, pointing to the board’s decision last year that the two had no “material conflict of interest” in the SoftBank rescue package that was agreed to in October.
SoftBank is using its control of the We Co. board -- which it obtained as part of the rescue agreement last fall -- to “silence the committee and eliminate the litigation about SoftBank’s failure to abide by its obligations,” according to the response viewed by Bloomberg.
“It is unsurprising that SoftBank rejects the concept of a fully empowered, independent committee in view of its practice of bullying companies in which it invests,” the letter said.
Representatives for SoftBank, WeWork and the special committee declined to comment.
Delaware Chancery Judge Andre Bouchard on Friday denied a bid by the committee to fast-track the lawsuit, setting January as the trial date, roughly halfway between the time lines requested by both parties.
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