Zuckerberg's Non-Voting Stock Plan: A Hedge Against California's Billionaire Tax While Preserving Meta Control
Meta Introduces Class C Shares
During Meta's earnings call on Wednesday, the company revealed that its board had approved a new class of non-voting stock, called Class C common stock. These shares grant holders an ownership stake but carry no voting rights on company decisions. The new class takes effect in January.
Meta says it will use the stock for capital raising, employee compensation, and acquisitions—including its expensive push into AI—while maintaining the current voting structure that favors founder and CEO Mark Zuckerberg, who controls approximately 60% of the vote.
The California Billionaire Tax Connection
The New York Times reports that there is another motivation behind the new share class: helping Zuckerberg pay California's proposed "billionaire tax," should voters approve it. Because the new shares carry no voting rights, he could sell some of them to cover the tax without surrendering voting control.
Proposition 40, drafted by Berkeley tax law professors and sponsored by California's largest healthcare union (SEIU United Healthcare Workers West), would impose a one-time 5% wealth tax on the net worth of several hundred California billionaires who primarily reside in the state. Backers estimate the policy could generate as much as $100 billion over five years, with the bulk directed toward the state's healthcare needs and the remainder allocated to food assistance and education.
Boardroom Pressure and a Contingency Plan
The Times also reports that Zuckerberg pressed Meta's board to devise a plan protecting him from the tax. According to the newspaper, he told board members in September that if they could not reach an agreement, he would list his Palo Alto property for sale—potentially igniting a media firestorm. Not long afterward, the stock plan materialized.
SEC Filing Documents the Rationale
The Times reporting is partially based on a recent SEC filing made by Meta, which documents concerns surrounding Proposition 40 and how they informed discussions that led to the new stock class.
The filing states that as far back as July, Zuckerberg was discussing the billionaire tax with board members. The topic resurfaced in additional meetings and communications throughout July and August.
How the Plan Works
The filing also describes the mechanics of the plan. Meta is creating a new class of non-voting shares, Class C, and will distribute one such share for every Class A or Class B share shareholders own. The company calls this a one-time stock dividend and says it should amount to a two-for-one stock split. The dividend "will not change the voting power of any shareholder," Meta says.
This is where Proposition 40 becomes relevant. The filing says the dividend "will allow Mr. Zuckerberg to immediately sell or transfer up to 20% of the shares of Class C common stock that he receives in the Dividend, representing 10% of his overall economic stake in the Company, 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." Because the dividend is one-for-one, half of his post-dividend shares will be Class C, so the 20% cap equals 10% of his total economic stake.
Meta's Position
When reached for comment by TechCrunch, Meta referred to a quote included in its recent earnings press release that reiterates part of the motivation for creating the stock was to retain Zuckerberg: "The Special Committee affirmed its belief that it was important for Mr. Zuckerberg to continue to lead the Company from California, including because it was crucial that Mr. Zuckerberg remains in close coordination with the Company's management and in close proximity to Meta Superintelligence Labs."
via TechCrunch