Co-working real estate firm WeWork is suing SoftBank and its Vision Fund for breach of contract, after the Japanese conglomerate withdrew from a deal that would have seen it become majority shareholder.
SoftBank announced last week it would retract its $3 billion tender offer, agreed as part of a rescue package designed to prevent WeWork becoming insolvent after a catastrophic IPO saw the firm’s valuation plummet by over 75%.
According to WeWork, none of the conditions listed by SoftBank give it legitimate grounds to withdraw from the agreement, and SoftBank has instead “engaged in a purposeful campaign to avoid completion of the tender offer.”
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WeWork, which has been hit hard by unpaid rent and broken leases amid the coronavirus pandemic, has also been forced to forgo $1.1bn of debt financing that hinged on the successful completion of the tender.
The lawsuit is emblematic of the increasingly frayed relationship between WeWork and its investor SoftBank, which played an intrinsic role in the meteoric rise of the co-working company, valued at $47 billion at its peak.
SoftBank’s legal argument is propped up by a clause in the rescue package that permits the group to withdraw should any party involved in the transaction face “material liability” following an enquiry into WeWork and its enigmatic co-founder Adam Neumann.
However, WeWork disputes the line of argument, which it claims is unfounded.
“SoftBank’s failure to consummate the tender offer is a clear breach of its contractual obligations...as well as a breach of SoftBank’s fiduciary obligations to WeWork’s minority stockholders, including hundreds of current and former employees,” said WeWork in a statement.
SoftBank, meanwhile, has referred to the lawsuit as a “desperate and misguided attempt” to redefine the original agreement, and claims it will “vigorously” defend itself.
“Nothing in the special committee’s filing today credibly refutes SoftBank’s decision to terminate the tender offer,” the group added.
The verdict will ultimately be determined by the judge's interpretation of the tender offer's language and the analysis of material liability.
Via Financial Times