WeWork CEO Adam Neumann, like the CEOs of other high-flying startups that have gone public recently, holds shares in his company that will give him extra votes.
But Neumann’s stock will give him 20 votes per share — twice as many as votes as the stock held by many of his peers, the company revealed Tuesday in the paperwork it filed for an initial public offering.
Thanks to that voting power, Neumann holds majority control over WeWork and is expected to continue to wield that control long after its IPO.
WeWork stories here.
Many CEOs at the helm of newly public tech companies have special shares with extra voting power, allowing the executives to maintain control over their companies.
But Adam Neumann, the founder and owner of WeWork, has shares that give him even more votes than those held by his peers. Neumann gets 20 votes per share with his super-powered stock; other CEOs with such stock usually get about 10 votes per share.
The We Company — WeWork’s parent corporation — will have three classes of shares, it disclosed Wednesday in the paperwork it filed to go public. Class A shares, which will trade publicly after its IPO, will have one vote per share. Class B and Class C shares, nearly all of which are owned or controlled by Neumann, will have 20 votes each.
Thanks to that power, Neumann holds a majority of the voting power at the We Company and is expected to continue to do so long after its public offering.
“Upon completion of this offering, Adam Neumann will own or control more than 50% of the total voting power of our capital stock and, as such, we will be a controlled company,” We Company warned prospective shareholders in its IPO filing. “For so long as we are a controlled company,” We continued, “you will not have the same protections afforded to stockholders of [other] companies.”
WeWork’s share arrangement is related to its complex structure
We Company just created the Class C shares as part of a corporate reorganization over the last two months that put in place an unusual and Byzantine corporate structure, the company revealed in its IPO filing. That corporate structure could limit the taxes Neumann and other insiders pay on We Co.’s future profits, while increasing the potential tax liability of outside shareholders.
Class C shares can be converted into Class B ones, and Class B ones can be converted into Class A shares. Class A shares can’t be converted into shares of either one of the other classes of stock.
Having multiple classes of stock with differing voting rights used to be unusual and frowned upon by investors. But it’s become increasingly common, particularly among tech startups. Google and Facebook both have such structures, as do companies ranging from Roku to Lyft.
Read this: The era of the all-powerful tech CEO has only just begun, even though Facebook and Snap show why that’s a bad thing
Investors have questioned multi-class stock arrangements
Still, even among these …read more
Source:: Business Insider – Tech