During Meta’s earnings call on Wednesday, the company revealed its board had approved a new class of non-voting stock, called Class C common stock. The shares give the holder an ownership stake but no vote on company decisions. This class takes effect in January.
Meta says it will use the stock for capital raising, employee pay, and acquisitions — including its expensive push into AI — while maintaining the current voting structure that favors its founder and CEO, Mark Zuckerberg, who controls around 60% of the vote. Now, however, the New York Times has reported there’s another reason for the new class: helping Zuckerberg pay for California’s proposed “billionaire tax,” if voters approve it. Because the new shares carry no votes, he could sell some of them to cover the tax without giving up voting control.
Proposition 40, which was drafted by Berkeley tax law professors and is being sponsored by California’s largest healthcare union (SEIU United Healthcare Workers West), would level a one-time 5% wealth tax on the net worth of several hundred California billionaires who primarily live in the state. Backers say the policy could generate as much as $100 billion over five years, the bulk of which would be used to pay for the state’s healthcare needs, with the rest for food assistance and education. The Times also reports that Zuckerberg pressed Meta’s board to come up with a plan to protect him from the tax.
According to the paper, he told board members in September that if they couldn’t reach an agreement, he’d list his Palo Alto property for sale, potentially kicking off a media firestorm. Not long afterward, the stock plan materialized, the newspaper writes. The Times reporting is partially based on a recent SEC filing made by Meta, which documents the concern surrounding Proposition 40 and how it informed discussions that led to the new stock class.
The filing says that as far back as July, Zuckerberg was discussing the billionaire tax with board members. The topic came up again in additional meetings and communications throughout that month and August. The filing also describes how the plan would work.
Meta is creating a new class of non-voting shares, called Class C, and will give shareholders one of them for every Class A or Class B share they own. The company calls this a one-time stock dividend and says it should work out to a two-for-one stock split. The dividend “will not change the voting power of any shareholder,” Meta says.
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