Meta's new stock class aims to keep control as billionaires face California tax

Meta’s board approved a new class of nonvoting stock to help Mark Zuckerberg manage California’s potential billionaire tax. The shares give ownership but no voting rights, allowing Zuckerberg to sell some without losing control. This move comes as California considers Proposition 40, a one-time 5% wealth tax on billionaires, which could generate up to $100 billion over five years for healthcare, food, and education. The New York Times reports that Zuckerberg pushed for this plan to protect himself from the tax, and the SEC filing shows he discussed it with board members as early as July. The stock split will allow Zuckerberg to sell up to 20% of his shares, representing 10% of his economic stake, without affecting his voting majority.

The new Class C shares will be given to shareholders for every Class A or B share they own, effectively a two-for-one stock split. This change means Zuckerberg could sell up to 20% of his shares, but only 10% of his total economic stake, as half of his post-dividend shares will be nonvoting. The company says this will not change the voting power of any shareholder.

California’s billionaire tax, if passed, could force Zuckerberg to pay up to $11 billion. Silicon Valley leaders like Sergey Brin have criticized the proposal, calling it economic suicide. But Meta’s new plan shows that billionaires may find ways to pay the tax and stay in California. Democratic Representative Ro Khanna said poor California kids could still get healthcare if the tax passes, even with Zuckerberg’s strategy.

Meta’s earnings call revealed the board’s approval of the new stock class, which will take effect in January. The company plans to use the stock for capital raising, employee pay, and acquisitions, including its AI push. This move keeps Zuckerberg in control, ensuring he remains in close coordination with management and near Meta Superintelligence Labs.

If Proposition 40 is passed, Zuckerberg would have to pay as much as $11 billion in taxes. But with the new stock class, he can sell up to 20% of his shares, representing 10% of his economic stake, without giving up voting control. This plan shows that billionaires may stay and figure out a way to pay the tax, as Khanna noted on X after news of Meta’s strategy spread online.