A lawsuit is being launched by minority shareholders against WeWork, Adam Neumann — its co-founder and former chief executive officer — and the prime investor, Japan’s SoftBank, Reuters reported on Friday (Nov. 8).
In a proposed class action filed in San Francisco Superior Court, the lawsuit seeks to recoup losses following WeWork’s failed initial public offering (IPO). The botched IPO caused WeWork’s value to drop over 87 percent.
Former WeWork employee Natalie Sojka of San Francisco alleges in the Nov. 4 lawsuit that WeWork’s board of directors disregarded its “fiduciary duties” to her as well as to other minority shareholders.
She said SoftBank bailed out WeWork by boosting its stake at a “fire-sale” price and giving Neumann $1.7 billion to step-down.
Ten defendants are named in the lawsuit, including WeWork and Neumann as well as SoftBank and its chairman, Masayoshi Son.
“WeWork believes this lawsuit is meritless,” a WeWork spokeswoman told Reuters.
Also on Friday (Nov. 8), WeWork issued a “90-day game plan” to overhaul its business, CNBC reported.
The office-sharing company said it was getting rid of several side ventures, including content marketing platform Conductor, women-focused coworking start-up The Wing, and Wavegarden, a maker of wave pools, among others.
WeWork stated that looking ahead, the company’s leadership would be “proven executives in membership-focused, subscription-based businesses.” Co-CEOs Sebastian Gunningham and Artie Minson replaced Neumann in September.
Japan’s SoftBank reported a $6.5 billion loss on Wednesday (Nov. 6), its first quarterly drop-off in 14 years and far larger than analysts’ estimates.
The $10-plus billion WeWork bailout — an investment Son called an error in judgment — triggered a loss of ¥970 billion ($8.9 billion) at SoftBank’s Vision Fund and a smaller fund.
“There was a problem with my own judgment, that’s something I have to reflect on,” he said at a news conference following the quarterly earnings report.
For the July-September quarter overall, SoftBank recorded a net loss of ¥704.4 billion yen ($6.5 billion) after write-downs in WeWork and other investments.