Meta has approved a new category of nonvoting stock, and a regulatory filing indicates it could help chief executive Mark Zuckerberg pay a proposed California billionaire tax without giving up control of the company. The company disclosed the move during its earnings call on Wednesday.
The new shares, designated Class C common stock, give holders an ownership stake but no say in company decisions. They take effect in January. Meta says it plans to use them to raise capital, compensate employees and fund acquisitions, including its costly expansion in artificial intelligence. The existing voting structure, which favors Zuckerberg, will stay in place. He controls roughly 60% of the vote.
The New York Times has since reported that the stock class also serves another purpose: helping Zuckerberg cover a levy under California's Proposition 40 if voters approve it. Because the shares have no voting rights, he could sell some to pay the tax while keeping his majority voting power.
Proposition 40 was drafted by tax law professors at Berkeley and is sponsored by SEIU United Healthcare Workers West, the state's largest healthcare union. It would impose a one-time 5% tax on the net worth of several hundred billionaires who live mainly in California. Supporters estimate it could raise as much as $100 billion over five years, with most of the money going to healthcare and the remainder to food assistance and education.
According to the Times, Zuckerberg pushed Meta's board to devise a way to shield him from the tax. The paper reports that in September he told directors that if they could not agree on a solution, he would put his Palo Alto property up for sale, a step that might have drawn intense media attention. The stock plan emerged soon afterward, the newspaper says.
Part of the reporting draws on a recent Meta filing with the Securities and Exchange Commission. It says Zuckerberg discussed the billionaire tax with board members as early as July, and that the subject returned in further meetings and communications through that month and August.
The filing explains the mechanics. Meta will give shareholders one Class C share for every Class A or Class B share they hold, in what it calls a one-time stock dividend that should amount to a two-for-one split. Meta says the dividend "will not change the voting power of any shareholder." It would allow Zuckerberg to sell or transfer up to 20% of the Class C shares he receives, equal to 10% of his total economic stake, "for any reason, including so that he may pay his potential tax liability under California Proposition 40, if enacted into law, without affecting his majority voting control."
Asked for comment by TechCrunch, Meta pointed to a statement in its earnings release. In it, the board's Special Committee said it was important for Zuckerberg to keep leading the company from California, partly so he remains in close contact with management and near Meta Superintelligence Labs. Zuckerberg's potential bill has been estimated at as much as $11 billion.
The proposal has angered many prominent figures in Silicon Valley. Google co-founder Sergey Brin has campaigned hard against it and spent heavily to defeat it, and other business leaders have argued online that it would prompt capital flight from the state. Democratic U.S. Representative Ro Khanna, a supporter, wrote on X that "billionaires will stay and figure out a way to pay the tax," adding that passing Prop 40 would mean "poor California kids can have healthcare."
