WeWork gears up for potential legal fight with SoftBank

Japanese conglomerate — which will now sell up to $41B of its assets to buy back its own shares — says investigations into co-working giant could let it walk away from $3B deal

Softbank CEO Masayoshi Son (Credit: Getty Images, iStock)
Softbank CEO Masayoshi Son (Credit: Getty Images, iStock)

SoftBank recently advised WeWork shareholders that it might renege on part of its rescue package, and a pair of independent directors for the co-working firm are considering all options in response, including legal action, according to Bloomberg and the Wall Street Journal.

SoftBank had struck a deal to buy $3 billion worth of stock in WeWork, effectively rescuing the company after a disastrous initial public offering attempt. However, the conglomerate sent a message to stockholders saying it could withdraw from the agreement in the wake of several government inquiries into WeWork from agencies including the Manhattan district attorney and the Securities and Exchange Commission.

SoftBank has said it is still honoring its obligations laid out in the agreement and has given WeWork more than $5 billion since October, but not every condition for its offer has been met. It can walk away from the deal if government inquiries or investigations result in material liability for WeWork.

“The main beneficiaries of the tender are Adam Neumann, large institutional investors, and some prior officers of the company,” a SoftBank spokesperson told Bloomberg. “Current WeWork employees have already benefited greatly from the repricing of their options in an earlier phase of the tender offer and would receive less than 10% of the proceeds.”

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SoftBank is changing its stance on the deal amid plunging markets as the coronavirus spreads. The Japanese conglomerate also said it intends to sell as much as $41 billion of assets to buy back its shares and redeem debt in an effort to halt its falling stock and bond prices, according to the Journal.

Several WeWork locations are still open, but the company could be on the hook for billions in long-term lease liabilities if widespread “work from home” mandates cause tenants to choose not to renew their short-term leases.

Venture capitalist Bruce Dunlevie and former Coach CEO Lew Frankfort make up WeWork’s special committee, and discussed ways they think they could force SoftBank to follow through with its investment during a phone call Thursday night, according to the Journal. The offer was supposed to be completed by April 1.

A WeWork board spokeswoman told the Journal that they were “committed to taking all necessary actions to ensure that the tender offer, which SoftBank has promised to our employees and shareholders is completed.” [Bloomberg, WSJ] — Eddie Small