The chaos behind SoftBank’s scrapped $3 billion deal
SoftBank’s lawyers say Adam Neumann is suing the telecom giant, Bloomberg reports.
Earlier this year, SoftBank scrapped a $3 billion deal to buy up shares from existing stakeholders.
That deal would have given WeWork co-founder Adam Neumann nearly $1 billion for his shares alone in a company that had sunk from $47 billion in valuation to a single billion-dollar digit.
Which meant Neumann was set to walk away from the coworking company as a billionaire last year, when SoftBank agreed to the deal. Now, he’s an estimated multi-millionaire and one who intends to sue SoftBank, according to the telecom giant’s lawyers.
Attorneys representing Neumann have sent a letter to SoftBank saying he is reserving his rights, a source with knowledge of the matters told Term Sheet.
Meanwhile, what wasn’t previously revealed in the deal: the amount other investors could stand to gain from it. Benchmark tendered shares worth $627 million, and entities tied to WeWork board member Lew Frankfort tendered some $40.3 million, according to a new Bloomberg report.
WeWork’s special committee, on which Frankfort and Benchmark Capital’s Bruce Dunlevie sit, previously filed suit on April 7 over the failed deal. SoftBank has argued that the committee lacks the authority to represent WeWork.
An important subnote: It’s not just about liquidity for existing shareholders. SoftBank’s pullback also prevents WeWork from accessing some $1.1 billion in debt financing from the Japanese giant.
Debt on debt: The coronavirus has devastated retailers that rely on foot traffic. Now, Neiman Marcus is set to become the first major U.S. department store chain to seek bankruptcy protection owing to the pandemic. The already debt-laden company is reportedly negotiating a loan “totalling hundreds of millions of dollars” to sustain itself through the bankruptcy process. Ares Management Corp and Canada Pension Plan Investment Board back the company.
But as department stores suffer, discount retailers could come out of the coronavirus in better shape.
$350 billion isn’t cool, you know what’s cool? $1 trillion: The Senate plans to meet today for a potential vote on a stimulus measure that would provide more funding for the Paycheck Protection Program, after the first $350 billion PPP round ran out in a mere two weeks and left many out in the cold. As of now, the package would include $370 billion directed to small businesses, $75 billion for hospitals, and $25 billion for testing.
Expect another mad scramble. The second round is expected to dry up even faster than the first, as banks are more familiar with handling large volumes of PPP funding. Banking industry representatives tell Politico that the program needs closer to $1 trillion to meet demand, given a burn rate of about $50 billion a day.
The new vote comes after a messy rollout for the initial program, as Washington prioritized speed over finesse. Now, small businesses are suing banks tasked with meteing out the loans such as JPMorgan and Wells Fargo, claiming that banks prioritized the most lucrative deals (lenders are paid between 1% to 5% in fees to process PPP loans).
Meanwhile, hedge funds and large hospitality chains are lining up for PPP payouts—parties that, while technically qualified for the forgivable loans under the program’s loose eligibility guidelines, probably aren’t the intended recipients.