Market Overview

SoftBank Goes Back On Its Decision To Buy $3B WeWork Shares From Neumann, Others

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SoftBank Goes Back On Its Decision To Buy $3B WeWork Shares From Neumann, Others

SoftBank Group Corporation (OTC: SFTBY) on Wednesday announced that it wouldn't purchase $3 billion worth of shares from WeWork's other shareholders.

WeWork Stakeholders Didn't Meet Terms, SoftBank Says

The Japanese investment firm had promised to buy the shares as part of a $9.5 billion bailout deal in October last year, where it ended up acquiring a controlling majority stake in the co-working space company.

SoftBank said in a statement that all parties had agreed that certain "closing conditions" would need to be met before the company would buy any of the shares. Those conditions haven't been met, it claimed.

Some of the conditions that weren't met, per SoftBank, included the failure to "obtain the necessary antitrust approvals," "sign and close the roll up of the China joint venture," and "close the roll up of the Asia joint venture."

Remains ‘Fully Committed' To WeWork

According to SoftBank, it has committed more than $14.25 billion to WeWork, including $4.5 billion since the buyout agreement.

The abandonment of the tender offer won't affect the startup's operations or a majority of its employees in any way, the statement noted.

"SoftBank remains fully committed to the success of WeWork and has taken significant steps to strengthen the company since October, including newly committed capital, the development of a new strategic plan for WeWork and the hiring of a new, world-class management team," SoftBank Senior Vice President and Chief Legal Officer Rob Townsend said.

The statement noted that it was WeWork founder Adam Neumann, his family, and select institutional investors"stood to benefit most from the tender offer."

"Given our fiduciary duty to our shareholders, it would be irresponsible of SoftBank to ignore the fact that the conditions were not satisfied and to nevertheless consummate the tender offer," Townsend added.

Why It Matters

The SoftBank abandonment of the part of the deal is likely to result in a legal battle.

The WeWork Board of Directors special committee last month said that it remained "committed to take all necessary actions" to make sure that SoftBank lives up to its end of the bargain.

The two-member committee represents the interests of the two largest institutional investors in the startup after SoftBank, who stand to benefit from the tender offer.

Activist investor Elliott Management Corp. acquired a significant stake in SoftBank and has been pushing for reforms. The Tokyo-based investor's CEO Masayoshi Son earlier said that he regretted making the WeWork investment.

Price Action

SoftBank's shares closed 5.9% lower at $16.60 in the otc market on Wednesday.

 

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