WeWork asks judge to dismiss lawsuit against SoftBank by two directors

FILE PHOTO: A WeWork logo is pictured in the Manhattan borough of New York City, New York, U.S., October 4, 2019. REUTERS/Carlo Allegri

We Co., the parent of WeWork, asked a judge to dismiss a lawsuit brought by two of its board members against SoftBank Group Corp. for reneging on a $3 billion offer to buy the co-working company’s closely held shares.

We Co.’s independent board members Alex Dimitrief and Frederick Arnold said the company’s special committee — comprising Lew Frankfort and Benchmark’s Bruce Dunlevie — “does not and should not have the authority” to pursue the litigation in the name of We Co., according to a Delaware Chancery Court filing. We Co. declined to comment outside of the filing.

“An entirely independent committee of directors who have no affiliation with SoftBank conducted a thorough review and concluded that the members of the special committee never had the authority and should not have authority to act for WeWork,” a SoftBank spokesperson said on Thursday. “WeWork investors have benefited immensely from SoftBank’s investment.”

In May, WeWork co-founder Adam Neumann separately sued SoftBank for scuttling the $3 billion tender offer — part of a bailout package from Masayoshi Son’s conglomerate after WeWork’s failed initial public offering last year. Neumann was ready to sell shares under the agreement.

SoftBank scrapped the $3 billion share purchase in April, saying conditions for the deal hadn’t been met. Frankfort and Dunlevie sued. We Co. created a second special committee and added two new independent directors to evaluate whether to proceed with the suit.

The new committee concluded Frankfort and Dunlevie didn’t have legal grounds for bringing the suit since they weren’t slated to sell shares as part of the SoftBank deal. Lawyers for the two original independent directors dispute those findings, saying they mirror SoftBank’s arguments to have the case thrown out.

SoftBank’s decision to bring replacement directors, who were “paid $250,000 each for two months of service,” had a single aim, and that was to “conclude the (original) Special Committee lacked authority to pursue this lawsuit on the company’s behalf,” William Chandler III, the lawyer representing Frankfort and Dunlevie, said in a letter filed Thursday.

The new committee’s report “is a polished document based on facts and arguments ‘spoon-fed’ by SoftBank’s lawyers and its hand-picked management team to reach the conclusions SoftBank desired,” said Chandler, the chancery court’s former chief judge. “Not surprisingly, then, much of the report adopts the facts and even the verbiage from SoftBank’s pleadings in this case.”

Judge Andre Bouchard, who replaced Chandler as chief judge, held a July 22 hearing on SoftBank’s request to have the original Special Committee’s suit thrown out on procedural grounds. The judge hasn’t ruled yet on that request.

The case is The We Co. v. SoftBank, 2020-0258, Delaware Chancery Court (Wilmington).

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.