(Reuters) - A special committee of WeWork board members on Monday rejected an assertion by SoftBank Group Corp that it does not have authority to represent the interests of minority shareholders of the office-sharing startup.
The back-and-forth presages what could become a long and messy legal dispute between SoftBank and the WeWork special committee, which is contesting SoftBank’s decision to back out of a $3 billion tender offer for WeWork shares agreed last year.
Since the agreement was made last October, WeWork’s occupancy rates have plummeted, as customers in big cities stay at home to prevent the spread of the coronavirus.
SoftBank this month said it would not press ahead with the tender offer because several pre-conditions had not been met, frustrating WeWork’s minority shareholders, who were expecting a payout. The investors included co-founder and former Chief Executive Officer Adam Neumann.
An independent special committee, comprised of Bruce Dunlevie, who is a general partner at WeWork shareholder Benchmark Capital, and Lew Frankfort, former CEO of luxury handbag maker Coach, had filed a lawsuit, calling SoftBank’s decision to terminate the tender offer wrongful.
“SoftBank’s ploy attempts to prevent the more than 850 current and former WeWork employees who tendered stock worth over $450 million from obtaining any remedy for SoftBank’s wrongful conduct,” the committee said in a statement.
“The present complaint reflects an effort by two directors to use WeWork’s resources to pursue a lawsuit designed to create a personal benefit for the directors who brought it. That is improper,” lawyers for SoftBank wrote on Friday to board members of the We Company, WeWork’s parent company.
In the letter, SoftBank’s lawyers requested that the board confirm that the special committee is not authorized to act on behalf of WeWork.
Separately, a judge in Delaware court last week set the trial date for early January.
The WeWork special committee plans to submit initial discovery requests for documents to SoftBank as early as this week, according to a person familiar with the matter.
The $3 billion tender offer was part of a $9.6 billion rescue package SoftBank had agreed with WeWork in October that gave it control of the company.
SoftBank has so far invested more than $13.5 billion in WeWork. But the conglomerate has been under growing financial strain, with souring tech bets bringing it under pressure from activist investor Elliott Management.
Reporting by Bharath Manjesh in Bengaluru and Joshua Franklin in New York; Editing by Shounak Dasgupta, Maju Samuel & Shri Navaratnam
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