- WeWork's former CEO, Adam Neumann, is suing SoftBank for backing out of its $3 billion tender offer to WeWork's early shareholders.
- Neumann once said he had a "beautiful relationship" with SoftBank's Masayoshi Son; in the lawsuit, he accuses the company of "abuse of power."
- Their relationship began to sour toward the end of 2018 when SoftBank reduced plans for a previous investment, according to a person familiar with the negotiations.
WeWork cofounder and former CEO Adam Neumann, who once called his relationship with SoftBank's Masa Son "beautiful", is now suing the Japanese conglomerate -- and his language has changed dramatically.
In the lawsuit, Neumann accuses SoftBank of backing out of a key provision of its nearly $10 billion bailout of the coworking company, which SoftBank agreed to in October. The deal gave SoftBank control of the company and included a $3 billion tender offer to WeWork's early shareholders, but SoftBank withdrew the tender offer last month. Neumann would have been the biggest beneficiary of the tender offer, cashing out $970 million worth of his stake. Other early investors and employees would have also sold shares in the offer.
In his complaint, Neumann alleges that SoftBank "doubled down on their abuse of power" and argues that its "deteriorating" financial position influenced its decision to renege on its obligations. It calls out Masa Son, accusing him and others at SoftBank of using influence to pressure investors to prevent the roll-up.
The suit also accuses SoftBank of "secretly taking actions" to undermine the agreement.
In response to the lawsuit, SoftBank Group's Chief Legal Officer Rob Townsend said the company will "vigorously defend itself against these meritless claims" and that it "had no obligation to complete the tender offer."
Neumann's relationship with SoftBank began to sour toward the end of 2018, before it spilled out into the public. SoftBank was set to invest $20 billion in WeWork for a majority stake. A source familiar with the deal tells CNBC that it took nine months to hammer out, only for Softbank to walk away on the night of signing: December 24, 2018. The capital that Softbank did invest, $3 billion, gave WeWork a $47 billion private valuation before its botched IPO last year.
A spokesperson for Softbank declined to comment on the details of the 2018 financing.
The source, who spoke on the condition of anonymity, says that WeWork had already begun to spend the capital to reach ambitious 2019 revenue goals, which were part of the deal.
WeWork's business model requires signing long-term leases for commercial office space and extensive renovations before getting shorter term tenants into the space, a process that can take up to a year.
The person said that when SoftBank backed out, WeWork was forced to finance the deal without Masa Son's full financial backing. The pressure for more capital led WeWork to seek an IPO earlier than intended, in September of 2019, which exposed corporate governance issues and massive losses. Shortly after that, WeWork withdrew the IPO and Neumann departed as CEO.