WeWork directors are suing shareholder SoftBank for backing out of part of an emergency funding package struck last year.
A special committee of the co-working company’s board of directors said it has filed a lawsuit in the US, alleging that SoftBank has breached obligations on a $3bn tender offer for stock that was agreed as part of a package announced in October.
SoftBank announced last week that it was walking away from the tender offer after certain conditions were not met, including achieving antitrust approvals and the roll-ups of joint ventures in Asia. The group also highlighted “the existence of multiple, new, and significant pending criminal and civil investigations”, as well as actions from governments around the world during the Covid-19 pandemic that will impose “restrictions” on WeWork’s operations.
At the time, Rob Townsend, chief legal officer at SoftBank, said: “SoftBank remains fully committed to the success of WeWork and has taken significant steps to strengthen the company since October, including newly committed capital, the development of a new strategic plan for WeWork and the hiring of a new, world-class management team.
“The tender offer was an offer to buy shares directly from other major stockholders, and its termination has no impact on WeWork’s operations or customers. The tender offer closing was conditioned on the satisfaction of certain closing conditions the parties agreed to in October of last year for SoftBank’s protection. Several of those conditions were not met, leaving SoftBank no choice but to terminate the tender offer.”
Announcing the lawsuit, WeWork’s special committee said: “SoftBank’s wrongful action constitutes both a breach of contract and a breach of fiduciary duty to WeWork’s minority stockholders, including hundreds of its current and former employees.”
The committee went on: “Instead of abiding by its contractual obligations, SoftBank, under increasing pressure from activist investors, has engaged in a purposeful campaign to avoid completion of the tender offer.
“For example, SoftBank first tried to thwart the roll-up of WeWork’s joint venture in China, and then claimed that the conditions to closing the tender offer – one of which is the roll-up of WeWork’s joint venture in China – were not met. This, and SoftBank’s other claims related to its failure to complete the tender offer, are therefore either disingenuous or irrelevant to SoftBank’s contractual and other obligations.”
WeWork is seeking completion of the tender offer or damages from SoftBank.
The committee said investigations into WeWork and stockholder lawsuits in California “are not expected to create any material risk” and were known about by SoftBank when the funding deal was last amended, in December.
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