WeWork founder Adam Neumann is filling a lawsuit against his company’s major investor SoftBank. It was after a $3 billion stock buyout did not push through.
Reports claim that Neumann is accusing SoftBank of breach of contract. Moreover, Neumann claims that the Japanese conglomerate is secretly making plans to undermine his authority
In a response, SoftBank says that Neumann’s actions are widely misguided and that that latter is trying to rewrite what really transpired during negotiations. Neumann is planning to merge a similar case against filed by WeWork’s board against SoftBank in April.
The $3 billion failed stock deal
In 2019, SoftBank is looking to bail out The We Company due to unprofitability and risky operations. SoftBank also wants to write off billions of dollars of investment because of WeWork’s actions.
— Mathew Lodge (@mathewlodge) May 5, 2020
SoftBank’s proposal include a plan to buy $3 billion worth of stocks from Neumann and a number of shareholders. Unfortunately, SoftBank pulled out of the deal claim that WeWork did not meet the conditions written on the contract.
Additionally, the Japanese conglomerate points out a number of legal inquiries from the United States Department of Justice and the Securities and Exchange Commission. Reports claim that Neumann plans to sell his stocks amounting to around $970 million.
A court filing of the lawsuit says:
“The abuses committed by [SoftBank] and SoftBank Vision Fund are so brazen that they have prompted legal action by a special committee of WeWork’s board.”
WeWork, with its promising business model, is the darling of the investment industry when it first. However, internal management issues result in the company botching its initial public offering. As the company collapses, WeWork enters the fray with a huge investment.
Doomed from the start
Many financial experts point out that Neumann’s mismanagement of the company has doomed WeWork from the start. SoftBank even went as far as buying him out of the company just to get rid of him.
WeWork’s failure to restructure a joint venture in China further exacerbate the divide. The ongoing COVID-19 pandemic left SoftBank with no choice but to pull the funding for that particular project.
SoftBank is touted as one of the most prolific investment firms of recent memory. However, the firm’s association and eventual investment with WeWork is seen by many as a miscalculation. The WeWork debacle even left questions about the firm’s investment strategy.
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