WeWork's Adam Neumann sues Softbank over failed deal

WeWork Co-Founder Adam Neumann sued SoftBank, claiming the Japanese tech company backed out of a deal that breaches its contract with WeWork. Yahoo Finance’s On The Move panel discusses.

Video Transcript

JULIE HYMAN: We are going to turn to another story now, and that is WeWork. WeWork coming out. And the founder of the company, Adam Neumann, is now suing SoftBank over the payout that was supposed to come to him. So I'm going to turn back to Melody on this story. Melody, this seems like it's kind of a never ending one.

MELODY HAHM: Yeah, the latest saga, Julie, of this WeWork vision fund battle. And in this case, Adam Neumann did file a lawsuit against SoftBank on Monday in the state of Delaware. And essentially let's back up a little bit. Last month, SoftBank backed out of a $3 billion tender offer for WeWork shares, saying that necessary conditions were not met by that April 1st deadline.

And they specifically pointed to outstanding regulatory investigations. The fact that there were increased lawsuits against Newman and WeWork and the failure to restructure a joint deal in China. And Neumann himself was set to receive nearly $1 billion for his shares for his equity in the We company.

SoftBank came out with numbers a couple of weeks ago saying that they're expecting an $8.4 billion for the fiscal year that just ended. Let's remember that SoftBank's $100 billion vision fund is not making any money. Never mind profitability at this point in time. They are just bleeding money. And this is not just a We company I want to point out.

It's a lot of their other investments-- the likes of Wag, which is a dog walking service, Plenty, which is an agri farm business. Most of these companies over the last few months, their losses have only accelerated, as they continue to lay off folks, because keep in mind, a lot of these businesses are moonshot and ventures. So they're very capital intensive.

They're not a B2B SaaS play oftentimes. These are very consumer-facing ventures. And so this is kind of the latest in this ongoing saga. And we don't know where it will quite end. But we do know it is an acrimonious split up between Neumann and Masayoshi Son, who were once kind of seen as best friends. And they were inseparable to a certain extent.

I heard an anecdote, actually, from a former comms official at WeWork who said that they actually only met for 15 minutes. Adam Neumann made a trip to Tokyo to meet with Masa Son several years ago. And after that 15-minute car ride, Masa decided to get it on WeWork. So just thinking about the impulsivity of both of these men, it's no surprise that it's turning out to be a very litigious series of events.

DAN ROBERTS: And guys, speaking of the fact that it's become litigious, I think that, you know, one caveat we should give-- people look at this story. And they roll their eyes because we know we're out of Neumann's reputation is these days. And they say, yeah, this man wants his billion dollars. And you're inclined to think, well, this is ridiculous.

The company had all its problems. And good luck clawing back that money. But I think it's important that we understand there is a legal agreement here. And it's not necessarily so automatically clear that Neumann is wrong. I mean, both sides have a legal case to be made.

You know, SoftBank and Masa Son are saying, here are all the metrics of the company [? NIST. ?] And here are the different cases and investigations against the company. And that's why we backed out. But WeWork, first part, it said that the agreement back from October included board seats that WeWork had already gone and went ahead and given to SoftBank and that those board seats were filled.

In other words, WeWork saying, we've already upheld parts of our side of the agreement. So that is just to say that this is going to play out maybe in court. Or maybe it'll be settled with attorneys. But it isn't necessarily the case that just because Adam Neumann clearly bungled a lot of things business-wise and just because WeWork clearly has a ton of fundamental problems as a business means that WeWork will not win this case against So--