WeWork, ex-CEO Neumann, Softbank sued over botched IPO, plummeting worth


NEW YORK (Information) – WeWork officers, together with co-founder and former Chief Govt Adam Neumann, are being sued by minority shareholders to recoup losses because the shared workspace supplier pulled its preliminary public providing and noticed its worth plunge greater than 87%.

FILE PHOTO: The WeWork emblem is displayed outdoors of a co-working area in New York Metropolis, New York U.S., January eight, 2019. Information/Brendan McDermid/File Photograph

In a proposed class motion filed this week in San Francisco Superior Court docket, former WeWork worker Natalie Sojka accused the corporate’s board of administrators of breaching its fiduciary duties to minority shareholders like her.

The San Francisco resident faulted the board for letting Japan’s SoftBank Group rescue WeWork by boosting its stake to a possible 80% from 29% at a “fire-sale” worth, and granting Neumann a $1.7 billion exit bundle.

Softbank and its chairman, Masayoshi Son, are among the many 10 named defendants within the Nov. four criticism, which additionally accuses them and Neumann of self-dealing.

“WeWork believes this lawsuit is meritless,” a spokeswoman stated on Friday. Softbank, its outdoors representatives, and Sojka’s lawyer didn’t reply to requests for remark.

The lawsuit is a brand new hurdle for WeWork, whose New York-based guardian, the We Firm, shelved its IPO on Sept. 30 after traders grew cautious of its losses, its enterprise mannequin and its company governance. Neumann had resigned the earlier week.

Estimates of WeWork’s valuation have sunk to as little as $5.9 billion, primarily based on the worth of Softbank’s proposed $9.5 billion rescue, from $47 billion in August.

WeWork on Friday revealed plans to divest all non-core companies and minimize jobs, and Neumann’s former chief of employees sued him final week for being pregnant discrimination.

Although shareholder lawsuits are sometimes related to publicly traded firms, WeWork’s non-public standing “has no bearing” on the deserves of a case, stated Michael Klausner, a company regulation and governance professor at Stanford Legislation College.

He additionally stated a self-dealing declare “is one thing a court docket will take a look at very fastidiously, and could be tough for defendants to dismiss.”

Sojka stated she was a WeWork shareholder whereas employed there for 1-1/2 years.

She stated that following her voluntary departure, she exercised inventory choices after being advised WeWork supposed to go public quickly and the worth of its inventory would rise considerably.

As an alternative, Sojka stated the defendants induced a giant drop within the inventory’s worth, and threatened “irreparable hurt” from the Softbank rescue and different transactions.

The lawsuit seeks to dam WeWork from rubber-stamping additional transactions with Softbank and Neumann, and limit inventory repurchases from minority shareholders. It additionally seeks punitive damages.

Softbank’s proposed rescue included $three billion to repurchase WeWork shares from present shareholders, together with as a lot as $970 million from Neumann.

The case is Sojka v Neumann et al, California Superior Court docket, San Francisco County, No. CGC-19-580474.

Reporting by Jonathan Stempel in New York; modifying by Jonathan Oatis and Sonya Hepinstall