Softbank Group Corporation said it has terminated a $3 billion tender offer for additional WeWork shares agreed last year with shareholders, drawing threats of legal action and plunging the floundering office space company further into crisis.

The tech investment giant said in statement that given its duty to its shareholders it could no longer proceed with the deal, citing criminal and civil probes into the startup, WeWork’s failure to restructure a joint venture in China and the impact of the coronavirus pandemic.

A special committee of WeWork’s board said it was disappointed and is considering “all of its legal options, including litigation.”

Softbank’s decision to rescind the offer means the Japanese firm is no longer obligated to proceed with a further $1.1 billion in debt financing for WeWork. It also underscores the depth of the disarray at WeWork, which is undergoing a drastic restructuring and whose earnings are at risk as many countries impose orders to stay at home due to the pandemic.

“WeWork is in real trouble and Softbank’s withdrawal from the share purchase worsens the situation materially,” Richard Windsor, an independent analyst, wrote in a note.

The startup, which lost $1.25 billion in the third quarter, told investors last week that it had $4.4 billion in cash and cash commitments and would be able to weather the economic downturn.

The tender offer, which would have mostly benefited a select group of shareholders including ousted co-founder Adam Neumann, had been agreed in October as part of bailout plan by Softbank after WeWork’s IPO plans flopped. Investors had been concerned about its losses and a business model that involves taking long-term leases and renting out spaces for a short term.

Reuters

In November, sources said the New York State Attorney General was investigating WeWork, examining whether Neumann, indulged in self-dealing to enrich himself. A spokeswoman for Neumann declined to comment at the time.

Softbank said in its statement that there were “multiple, new, and significant” pending criminal and civil investigations in which authorities have also requested information about WeWork’s financing activities and communications with investors.

Following the termination of the deal, Softbank shares closed up 2.5%, outperforming a 1.4% decline for the broader Tokyo market.

Softbank itself has been under growing financial strain, with souring tech bets bringing it under pressure from activist investor Elliott Management and pushing it into a radical pledge to raise $41 billion by selling down core assets to raise cash for share buybacks and to reduce debt.

A merger of its US wireless unit Sprint with T-Mobile US was completed on Wednesday, which will provide an undetermined gain to be booked in the quarter ending June and will reduce strains on its balance sheet.

Meanwhile, Japanese stocks fell for a fourth straight session on Thursday, hit by concerns the country was on the verge of a coronavirus crisis as the global death toll continued to climb.

The Nikkei index ended down 1.37% at 17,818.72, shedding 25% so far this year.

Experts warned on Wednesday that Japan was on the brink of a crisis as virus cases rise relentlessly around the nation, increasing the chance of lockdowns and other severe restrictions on personal movement that will hurt economic activity.

In the United States, President Donald Trump sounded a dire warning this week as the number of deaths from the respiratory illness climbed to around 5,000.

More US states are ordering residents to stay at home to slow the virus’ spread, pointing to a prolonged slowdown.

Weighing further on sentiment was data showing US manufacturing activity hit its weakest in 11 years last month, revealing the full extent to which the pandemic was damaging global growth.

“Some investors will buy on dips, but you can’t be too aggressive,” said Hideyuki Ishiguro, senior strategist at Daiwa Securities in Tokyo.

“There are a lot of speculators selling futures, because they expect further downside. It’s hard to predict how much corporate earnings and economic indicators will worsen.”

On Thursday, there were 28 advancers on the Nikkei index against 196 decliners.

The largest percentage losses in the index were department store operator J.Front Retailing down 8.15%, followed by printer and electronics maker Seiko Epson Corp losing 7.39%, and Subaru Corporation down 7.2% after the auto maker said it would suspend global production.

The largest percentage gainers in the index were oil producer Inpex Corporation up 4.51%, followed by parcel delivery company Yamato Holdings gaining 3.46%, and convenience store operator FamilyMart up 2.59%.

The broader TOPIX index ended Thursday down 1.57%.

The volume of shares traded on the Tokyo Stock Exchange’s main board was 1.64 billion, compared to the average of 2.07 billion in the past 30 days.

The coronavirus, which emerged in China late last year, has turned into a global pandemic that has claimed more than 40,000 lives and paralysed large swathes of the global economy.

Reuters