SoftBank Says It Won’t Buy WeWork Co-Founder Neumann’s Shares

As I predicted some time ago this will be the death knell of WeWork.... Aivars Lode

SoftBank Group Corp. terminated an offer to pay up to $3 billion for shares in office-space provider WeWork, depriving co-founder Adam Neumann of a potential windfall of nearly a billion dollars.

Tokyo-based SoftBank said Thursday its move wouldn’t affect operations of the troubled shared-office company. SoftBank said it has committed $5.45 billion in capital to WeWork since October 2019.

Mr. Neumann, former chief executive of WeWork parent We Co., had the right to sell up to $970 million in stock to SoftBank as part of the October deal that led to his ouster from the company’s board.

But SoftBank said conditions for completing the stock sale weren’t met by the April 1 deadline. It cited “multiple, new and significant pending criminal and civil investigations” that began after the October deal in which authorities requested information about WeWork’s financing activities and its business dealings with Mr. Neumann. SoftBank didn’t say which authorities were investigating.

After The Wall Street Journal reported in March that SoftBank was threatening to back out of the deal, a spokeswoman for the WeWork board’s committee of independent directors said SoftBank’s reasons were “inappropriate and dishonest.” The spokeswoman said: “Reneging on the agreement would be completely unethical, especially given the current environment.”

WeWork’s business of supplying office space has taken a hit during the coronavirus pandemic, which has led many people to work from home.

SoftBank cited the pandemic as one of its reasons for terminating the share acquisition, saying government lockdowns were “imposing restrictions against WeWork and its operations.”

“SoftBank remains fully committed to the success of WeWork,” said Rob Townsend, the Japanese company’s senior vice president and chief legal officer.

SoftBank said it had expected to report a loss connected to the share purchase because the price it was planning to pay was greater than the shares’ fair value. Canceling the transaction means it won’t have to report the loss after all. SoftBank shares rose 2.5% in Tokyo trading Thursday, while the overall market fell.

By Kosaku Narioka - Wall Street Journal