Infamous WeWork Founder and ex-CEO Adam Neumann just added to the We Company’s legal scuffle with SoftBank, on its backing off from the bailout package promised last year, holding $3 billion dollars offline.
Comparing Adam to Alibaba founder Jack Ma, SoftBank CEO Mayoshi Son had once said, “The last person I felt this with was Jack Ma”. Legend has it, that Adam was able to impress Son in just 12 minutes for a $4.4 billion investment in his startup. Well, not sure what that legend was, but it clearly did not pan out well for Softbank.
Once close business partners of each other, the two personalities now stand at court pointing fingers against each other. Past month, We Company had filed a lawsuit against SoftBank for not holding the bailout package agreement at Delaware Court of Chancery.
The lawsuit filed by Neumann cements the company’s stand alleging SoftBank took steps to undermine the agreement starting from December 2019. Calling the claims “baseless”, SoftBank’s chief legal officer Rob Townsend said, “Under the terms of our agreement, which Adam Neumann signed, SoftBank had no obligation to complete the tender offer in which Mr. Neumann—the biggest beneficiary—sought to sell nearly $1 billion in stock”.
What led to this ugly story?
In less than one year, WeWork emerged from being one of the highly valued startups of all time, to losing more than 3/4 of its value. At its peak time in early 2019, TechUnicorn valued the startup at 47 billion USD, much higher even than SpaceX.
With investments from SoftBank, WeWork expanded throughout the world and grew exponentially. Softbank had also invested in quite successful startups like PayTm, Nvidia and Flipkart, and with $2 Bn investment into WeWork in 2017, it raised its valuation at $47 bn.
Between 2017 and 2018, Softbank would invest around $8 Billion into the company. However, WeWork’s reckless spending and revealing corruptions done by its Founder & CEO Adam Newmann, led him to resign and appointment of two new CEOs, who postponed the IPO bid indefinitely. The company’s valuation dropped to $8B when SoftBank decided to inject much needed $9.5 billion bailout package, and took major stakes in WeWork.
Nevertheless, as impacts of Covid-19 started to grow sinking the company further, SoftBank went in “that’s enough” mode, and halted the $3 bn part of its $9.5 bn rescue package to WeWork for which it had signed agreement in October 2019. SoftBank argued that the pre-conditions mentioned in the agreement hadn’t been met, and is not in their best interest to press ahead with its offer via its Vision Fund. Earlier this year, SoftBank reported a shocking 99.9% fall in profits due to failed WeWork IPO and further declination of Uber’s shares.