The $3bn share tender was agreed last year as part of a multibillion-dollar rescue package that SoftBank put in place as WeWork was on the brink of insolvency. The tender offer was set to provide a lucrative payout to early backers of the company including Benchmark Capital and Adam Neumann, WeWork’s former chief executive.
Benchmark, Mr. Neumann and other investors were expected to sue over the collapse of the deal, according to people briefed on the matter.
SoftBank said in a statement on Thursday that it had decided to pull out after WeWork failed to meet a set of conditions behind the deal.
“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,” said Rob Townsend, SoftBank’s chief legal officer.
SoftBank added that it remained “fully committed” to the US group’s success and that its decision would not have any impact on WeWork’s operations.
Lawyers for Mr. Neumann, who had the option to sell nearly $1bn of stock in the deal, were informed of the decision on Wednesday, one of the people said. SoftBank is expected to notify other investors who had planned on selling their shares that it has withdrawn from the deal after the tender offer lapsed at about midnight.
SoftBank’s withdrawal marks the latest reversal for WeWork, which at one point was the most highly valued privately held group in the US. WeWork burnt through billions of dollars of cash as it expanded around the world under Mr. Neumann, opening locations in more than 100 cities. Its attempt to go public last year failed, as investors balked at its huge losses and a series of deals that benefited Mr. Neumann personally.
The decision to walk away from the $3bn share purchases will also take away a much needed source of cash from WeWork. SoftBank had agreed to provide $1.1bn of debt to the company as part of the transaction, but only if it completed the tender offer.