Meta introduced a new Class C share class during its third-quarter earnings report. The move follows private threats by CEO Mark Zuckerberg to leave California to avoid a proposed multibillion-dollar wealth tax. This structure maintains Zuckerberg’s voting control while meeting capital expenditure needs.
Meta Seeks External Capital For AI
Meta reported a need for outside capital to fund the AI boom in its third-quarter financial results. The company repurchased $26.3 billion in Class A stock in 2025. However, it then halted buybacks for four consecutive quarters.
Stock-based compensation totaled $21 billion in the first nine months of this year. Chief financial officer Susan Li stated during the earnings call that trading in the new Class C stock will begin in late January 2027.
We thought it was prudent to establish the appropriate capital structure framework to ensure that we have access to a diverse pool of funding sources.
Susan Li, Chief Financial Officer
Zuckerberg Fights For Voting Control
Zuckerberg clashed with a board committee including DoorDash CEO Tony Xu, Ambassador Robert Kimmitt, and former Microsoft executive Charles Songhurst. He wanted to keep his 60.6% voting control. At the same time, he prepared for tax liabilities under California’s Proposition 40.
Proposition 40 is a proposed one-time 5% wealth tax facing voters on November 3. Zuckerberg is ranked fifth on the Bloomberg Billionaires Index with a net worth of $246 billion. If the measure passes, he faces a multibillion-dollar bill.
Regulatory filings show Zuckerberg told lead independent director Robert Kimmitt in July that he has taken only a $1 annual salary from Meta since 2013. He warned that selling Class B shares to pay the tax could drop his voting stake to 53%.
By late July, Zuckerberg questioned if the tax would force him to leave the state. The board committee pushed for shareholder-friendly sunset provisions to convert Class B shares after his departure. Zuckerberg rejected these changes.
He told the committee he was considering establishing residence outside of California
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Non-Voting Shares Resolve Standoff
The dispute ended in August when Zuckerberg proposed issuing non-voting shares. On August 4, he suggested a dividend of 20 shares of Class C stock for each existing share. Zuckerberg pledged to stay in California or at Meta headquarters for eight years.
The final agreement gives a one-for-one Class C stock dividend to all shareholders. This acts as a two-for-one split. Zuckerberg can now sell 20% of his new Class C shares immediately. This represents 10% of his total economic interest in the company but protects his majority voting stake.
Implementation Timeline
Chan Zuckerberg entities holding 56% of the voting power signed off the day after the agreement was reached.
- July: Zuckerberg and Robert Kimmitt discuss potential wealth tax exposure and voting stake preservation.
- August 4: Zuckerberg proposes a non-voting share dividend after signaling intent to consider moving out of California.
- January 19, 2027: The new non-voting share structure officially takes effect following approval sign-offs.