The We Company (formerly WeWork)

On November 4, 2019, Bottini & Bottini filed the first shareholder class action lawsuit against WeWork, its Board of Directors, and Softbank.

If you are a shareholder of the We Company and would like to join the case, please call us at (858) 914-2001 or by email at fab@bottinilaw.com.

Plaintiff brings this class action on behalf of the minority stockholders of The We Company (“WeWork”, “We” or the “Company”) against The We Company and its Board of Directors (the “Board” or the “Individual Defendants”) and Softbank Group Corporation (“Softbank”) for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, corporate waste, and declaratory as well as injunctive relief. Defendant Adam Neumann (“Neumann”), the founder, Chairman, CEO, and controlling shareholder of The We Company, in concert with Softbank, are using their control of The We Company to benefit themselves to the detriment of the Company’s minority shareholders. Plaintiff brings claims against the Defendants for their breaches of fiduciary duty and/or for aiding and abetting other Defendants’ breaches of fiduciary duty. Defendants’ actions are substantially unfair to The We Company’s minority shareholders and have caused and will continue to cause significant damage to the Company and its shareholders.

Neumann and Softbank are attempting to use their control of the Company to benefit themselves to the detriment of the Company’s minority shareholders. Neumann has recently abused his control of the Company to usurp $1.7 billion in payments to himself, which payments were approved by Softbank. Softbank stands to benefit from the proposed transactions because it is increasing its stake by buying up shares at depressed values which were created by Defendants’ own wrongdoing. At the same time, the value of the stock and options held by minority shareholders has been eviscerated due to Neumann’s wrongdoing, with their stock options being underwater and the value of their stock being driven to levels well beyond what they paid for the stock. See Rani Molla, “85 Percent of WeWork’s White-Collar Employees Don’t Think Adam Neumann’s $1.7 Billion Exit Package is Fair,” RECODE, Oct. 28, 2019. Softbank is attempting to further benefit from its wrongdoing and that of Neumann by trying to commence a tender offer to buy out minority shareholders, thereby increasing its control of the Company to approximately 80% and giving it outright control of the Company. The price Softbank purportedly intends to offer minority shareholders – $19.19 – is grossly unfair and represents an abuse of control by Neumann and Softbank, and unfair treatment of minority shareholders. The proposed transactions are subject to entire fairness review under California law.

It is an axiomatic principle of corporate law that a wrongdoer cannot benefit from his own wrongdoing. This principle has heightened application in the context of a situation such as the present case where the defendants are majority and controlling shareholders who owe fiduciary duties to the minority shareholders. The self-interested transactions being proposed by Softbank and Neumann are not entirely fair to the minority shareholders. Neumann, who ruined WeWork, is being treated disparately, and both he and Softbank would receive unique benefits not shared by the minority shareholders if the transactions are not enjoined. See Rani Molla, “Why WeWork Founder Adam Neumann is Getting $1.7 Billion to Leave the Company He Ran into the Ground,” RECODE, Oct. 22, 2019. Among other things:

(a) Neumann stands to receive much more for his shares than the consideration being offered to minority shareholders in the tender offer to be launched by Softbank, which tender offer is coercive and both procedurally and substantively unfair;

(b) In addition to payment of more money for Neumann’s stock, Softbank is proposing to pay Neumann $500 million to pay off his personal loan from JPMorgan Chase, which was one of the underwriters for the failed IPO and which holds a lien on Neumann’s WeWork stock;

(c) The transactions, if not enjoined, will further substantially dilute minority shareholders who do not accept the grossly unfair tender offer;

(d) Despite breaching his fiduciary duties by engaging in self-dealing and mismanaging WeWork so badly that its IPO had to be withdrawn, Neumann is being offered a staggering $185 million “consulting fee” despite the fact that Softbank seems to concede that Neumann ruined the Company. It is beyond comprehension why Neumann would be paid $185 million to provide strategic guidance to the Company when his “guidance” resulted in the virtual
destruction of the Company. Instead, the fee simply represents self-dealing and an improper personal payment to Neumann. To put Neumann’s $185 million consulting fee in perspective, the 200 highest-paid CEOs at public companies last year had a median pay of $18.6 million, according to Equilar. Typically, CEOs receive exit packages that are multiples of their salary and bonus. Neumann’s consulting fee alone would equal 10 years of that median salary. The terms of Neumann’s “consulting” agreement have not yet been disclosed.

The We Company (which was known as WeWork until July 2019) attracted talented individuals to work at WeWork by awarding employees stock options and stock awards that Defendants represented would increase substantially in value after WeWork went public. However, as described herein, through Defendants’ breaches of fiduciary duty, Defendants caused substantial harm to We, ultimately forcing We to withdraw its IPO and substantially decreasing the value of the equity awards and options held by Plaintiff and the Class, who had worked hard to create value at We.

The Defendants, however, were treated disparately. Instead of experiencing similar harm to their equity interests, Defendants engaged in self-dealing and protected their own interests to the detriment and expense of the Company’s minority shareholders.

Defendants Neumann and Softbank have abused their domination and control of The We Company and breached their fiduciary duty as majority and controlling shareholders of The We Company by causing harm to the Company and preferring their own interests over those of the Company’s minority shareholders.

Far from saving WeWork, Softbank is also engaging in self-dealing because it is significantly increasing its stake in the Company at fire-sale prices.