Meta Creates New Shares to Help Zuckerberg Handle California Tax

Meta's board has approved a new category of stock, called Class C common stock, that will be distributed to shareholders in January. This new type of share grants an ownership stake in the company but carries no vote in company decisions. Meta stated the stock would be used for raising capital, paying employees, and making acquisitions, including its investment in artificial intelligence. This structure would not alter the current voting power held by its founder and chief executive, Mark Zuckerberg, who controls approximately 60% of the vote.

According to a report from the New York Times, the new stock class serves another purpose: it is a strategy to help Zuckerberg pay for a proposed tax on billionaires in California. Because the new shares do not carry votes, he could sell them to cover the tax bill without giving up his majority voting control.

This plan relates to Proposition 40, a measure that would impose a one-time 5% wealth tax on the net worth of several hundred California billionaires who primarily live in the state. Supporters of the policy, drafted by Berkeley tax law professors and sponsored by the state's largest healthcare union, SEIU United Healthcare Workers West, estimate it could raise as much as $100 billion over five years. The majority of those funds would be designated for the state's healthcare needs, with the remainder going toward food assistance and education.

The New York Times report, which is based in part on a recent SEC filing from Meta, describes the discussions that led to the new stock plan. The filing states that as far back as July, Zuckerberg was discussing the billionaire tax with board members. The New York Times further reports that in September, Zuckerberg told board members that if they could not reach an agreement, he would list his Palo Alto property for sale, which could have triggered a media firestorm. The stock plan was developed shortly after that conversation.

According to the filing, the plan involves a one-time stock dividend that would give shareholders one Class C share for every Class A or Class B share they own. This process would result in a two-for-one stock split and would not change the voting power of any shareholder. The filing explicitly states that this arrangement will allow Zuckerberg to sell or transfer up to 20% of his Class C shares, which represents 10% of his overall economic stake in the company, to cover any potential tax liability from Proposition 40 without affecting his voting control.

The creation of the new stock class follows the development of Proposition 40. The measure has drawn significant opposition from prominent figures in the tech industry. Google co-founder Sergey Brin has campaigned aggressively against it and spent a considerable amount to try to defeat it. Other critics have described the proposal as economic suicide for California, arguing it would cause capital to leave the state.

After news of Meta's strategy became public, Democratic U.S. Representative Ro Khanna, a proponent of the tax, wrote on X that it appears billionaires will remain and find a way to pay it. "If we pass Prop 40, poor California kids can have healthcare," he added.

It has been estimated that Zuckerberg would owe as much as $11 billion under the proposed tax. In response to a request for comment, Meta referred to a quote from its recent earnings press release, which affirmed the importance of Zuckerberg leading the company from California. The statement said it was crucial for him to remain in close coordination with management and in close proximity to Meta Superintelligence Labs.