WeWork sues SoftBank for scrapping $3B bailout

Embattled co-working giant says its biggest backer broke a contract

National /
Apr.April 07, 2020 02:18 PM
WeWork CEO Sandeep Mathrani and Softbank CEO Masayoshi Son (Mathrani by Neilson Barnard/Getty Images; Son by Tomohiro Ohsumi/Getty Images)

WeWork CEO Sandeep Mathrani and Softbank CEO Masayoshi Son (Mathrani by Neilson Barnard/Getty Images; Son by Tomohiro Ohsumi/Getty Images)

It’s official — WeWork is suing its biggest backer. And this probably won’t be the last time.

The embattled co-working giant is alleging that SoftBank wrongfully pulled out of an agreement to buy $3 billion worth of WeWork shares. That infusion would have helped stabilize WeWork as it worked to rebound from its failed IPO, as it faces a wave of vacancies brought on by the global coronavirus pandemic, the company said Tuesday, in a news release detailing the lawsuit.

The deal was part of a larger bailout package struck last fall after WeWork’s botched IPO. Last month, Softbank said it was pulling out of the $3 billion bailout because of “multiple, new and significant pending criminal and civil investigations” that changed the conditions ahead of the deal’s scheduled April 1 closing date.

The co-working company alleges SoftBank’s action breaks the agreement the two sides made last fall, and calls it “a breach of SoftBank’s fiduciary obligations to WeWork’s minority stockholders, including hundreds of current and former employees.”

WeWork is asking a judge to order the Japanese conglomerate to follow through with the purchase of those shares or pay damages for breaking the contract. The company also alleges that SoftBank has “received most of the benefits” in the fall agreement, including effective control of WeWork.

WeWork has been gearing up for a few weeks, ever since Softbank began hinting it would pull out of the bailout.

Meanwhile, the coronavirus pandemic is emptying offices and shared desk spaces at WeWork locations around the globe, despite the company’s best efforts to stay open during the pandemic, according to the Financial Times, which first reported on the lawsuit.

The company’s occupancy rate fell to around 64 percent at the beginning of this month, down from around 79 percent at the end of September, shortly after WeWork postponed its IPO.

WeWork is reportedly being overwhelmed with calls and emails from tenants refusing to pay rent or who want to break their leases, the Financial Times reported. The company is offering rent holidays and renegotiating monthly leases to retain some of its tenants.
The company has also been asking its own landlords to cut its rents.


Related Articles

arrow_forward_ios
Wendy Silverstein (Credit: Getty Images)
Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
WeWork CEO Adam Neumann (Credit: Getty Images and iStock)
WeWork’s side businesses are fizzling
WeWork’s side businesses are fizzling
Sarah Pontius (Credit: Union College)
Another head rolls at WeWork
Another head rolls at WeWork
Discovery Capital Management's Robert Citrone, Compass' Robert Reffkin and BlackRock's Larry Fink (Getty, Legends4Legends)
Institutional investors take dueling approaches to Compass stock
Institutional investors take dueling approaches to Compass stock
Lela Goren and 31 West 11th Street (Getty Images, Corcoran Group)
Developer sued over debts at Downtown penthouse, Hamptons mansion
Developer sued over debts at Downtown penthouse, Hamptons mansion
From left: Robert Reffkin, Masayoshi San, and Ori Allon (Photo Illustration by Steven Dilakian for The Real Deal with Getty Images)
SoftBank’s losses on Compass were $540M as of August. The brokerage’s stock is down by a third
SoftBank’s losses on Compass were $540M as of August. The brokerage’s stock is down by a third
A photo illustration of Joel Schreiber (right) and 146 West 57th Street (Getty Images, Google Maps)
Joel Schreiber’s Billionaires’ Row apartment faces tax foreclosure
Joel Schreiber’s Billionaires’ Row apartment faces tax foreclosure
Adam Neumann, Society Las Olas at 301 Southwest First Avenue in Fort Lauderdale, and the Stacks on Main at 535 Main Street, Nashville (Getty Images, Stacks on Main, Society Las Olas)
Inside Adam Neumann’s WeWork-ification of residential real estate
Inside Adam Neumann’s WeWork-ification of residential real estate
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...