Meta Creates Nonvoting Shares as Zuckerberg Plans for California's Billionaire Tax

Meta's board of directors has approved a new type of stock designed to give its CEO, Mark Zuckerberg, a way to pay a potential state tax liability without losing his control over the company. The decision to create this new class of nonvoting shares, called Class C, was revealed during the company's earnings call on Wednesday. The shares, which grant ownership but no voting power, are set to take effect in January.

According to the company, the new stock class is intended for raising capital, employee compensation, and acquisitions related to its significant investment in artificial intelligence. This method allows Meta to maintain its current voting structure, in which Zuckerberg holds approximately 60% of the voting power. However, reporting from the New York Times indicates another motivation for the plan: to help Zuckerberg prepare for California's proposed 'billionaire tax,' should voters approve it. Because the new shares carry no votes, he could potentially sell them to cover the tax bill while retaining his voting control.

The proposed measure, known as Proposition 40, would impose a one-time 5% wealth tax on the net worth of several hundred California billionaires who primarily reside in the state. The policy's backers, which include California's largest healthcare union, estimate it could raise as much as $100 billion over five years. The majority of those funds would be directed toward the state's healthcare needs, with the remainder allocated for food assistance and education programs.

The creation of the Class C shares is the result of discussions that began months earlier, according to a recent filing with the Securities and Exchange Commission (SEC). The filing outlines how the plan would function. Meta will issue one nonvoting Class C share to shareholders for every Class A or Class B share they currently own. The company characterizes this as a one-time stock dividend that will result in a two-for-one stock split. Meta states that this dividend "will not change the voting power of any shareholder."

The filing further clarifies that this structure would "allow Mr. Zuckerberg to immediately sell or transfer up to 20% of the shares of Class C common stock... 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." The document also notes that discussions about the billionaire tax with board members were underway as early as July. The New York Times reports that in September, Zuckerberg told the board that if they could not develop a plan, he would list his Palo Alto property for sale. The stock plan was developed shortly after that conversation.

Proposition 40 has faced significant opposition from prominent figures in the business community. Google co-founder Sergey Brin has campaigned actively against the measure, and other critics have described it as a policy that could lead to capital flight from the state. Estimates suggest Zuckerberg's potential liability under the tax could be as high as $11 billion.

The proposal has also drawn support from public officials. Democratic U.S. Representative Ro Khanna, who supports the tax, commented on Meta's strategy after news of it spread online. "Looks like billionaires will stay and figure out a way to pay the tax," Khanna wrote on X. "If we pass Prop 40, poor California kids can have healthcare," he added.

Meta's filing also includes a statement from its Special Committee affirming the importance of Zuckerberg's continued leadership in California. The committee cited the need for him to remain in close coordination with management and in close proximity to Meta Superintelligence Labs. The company's new stock policy would appear to provide a way for him to do so while navigating the state's proposed tax.