Coworking giant WeWork Cos. Inc. has adopted a structure known as an umbrella partnership corporation, or Up-C, ahead of a planned IPO, with the move expected to provide tax benefits to co-founder and CEO Adam Neumann and pre-IPO investors, London's Financial Times reported, citing documents seen by the publication and people familiar with the matter.
According to the report, the company recently restructured to a limited liability company, known as the We Co. MC LLC, from a corporation. The proposed IPO is expected to provide investors with an opportunity to acquire shares in a separate holding company that would hold an interest in the underlying LLC. The holding company and the LLC partners would split any profits, the publication added.
Neumann is likely to have a majority of the voting rights in the holding company, while he and a few other pre-IPO investors are expected to hold their economic interests as partners in the underlying LLC, the unnamed source told the FT. This would mean that Neumann and the insiders would pay taxes on their share of any profits at individual income tax rates.
Neumann would also likely keep a majority of the voting rights in WeWork despite owning a minority economic interest, the publication added, citing three of the sources.
The company is projected to raise several billion dollars in the planned offering, which the FT said would be the largest capital raising of any company going public as an Up-C.
WeWork declined to comment on the matter, the FT said.