Late last week, investment giant SoftBank backed out of a $3 billion deal to buy co-working startup WeWork’s stock back from minority shareholders.
Now, a special committee on WeWork’s board of directors has brought a lawsuit against the firm.
According to the committee, which announced the suit on Tuesday, SoftBank allegedly reaped the rewards of a deal the two had previously struck without paying up. SoftBank announced on April 2 that it had ended that portion of the deal because “certain conditions to the tender offer were not satisfied.”
At the center of the case is a deal made between WeWork and SoftBank’s Vision Fund in October 2019.
The deal allegedly included an agreement that SoftBank would purchase up to $3 billion of WeWork’s stock through a tender offer. This would allegedly give minority shareholders the liquidity they needed, according to the complaint, which was filed by the We Company on Tuesday in Delaware’s Court of Chancery.
“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,” said Rob Townsend, senior vice president and chief legal officer at SoftBank, in a statement published on April 2. “Several of those conditions were not met, leaving SoftBank no choice but to terminate the tender offer.”
SoftBank said that WeWork failed to get antitrust approvals and close joint ventures in China and Asia by April 1, its April 2 announcement said. SoftBank also pointed out that the coronavirus has resulted in governmental restrictions against WeWork.
Meanwhile, WeWork’s board alleged that SoftBank’s “buyer’s remorse” was compounded by the investment firm’s declining financial condition, noting that in November 2019, SoftBank reported its first quarterly loss in 14 years.
WeWork’s committee said in its complaint that SoftBank allegedly “began to invent a variety of reasons as to why it did not have to close the tender offer.”
“Their filing today is a desperate and misguided attempt now to rewrite that agreement and to rewrite the history of the past six months,” a spokesperson for SoftBank said via email Tuesday, adding that the firm will “vigorously defend” itself in the lawsuit.
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WeWork’s special committee — which includes two independent directors, venture capitalist Bruce Dunlevie and former Coach chief executive officer Lewis Frankfort — is asking the Delaware Court to find that SoftBank breached the terms of the deal and its fiduciary duty to the company and its minority shareholders.
The group is also asking for the court to order SoftBank to close the tender offer, and if not, award compensatory damages for alleged breach of contract and fiduciary duty and legal fees.