Meta creates new nonvoting shares to help Zuckerberg handle California tax

Meta announced on Wednesday that its board has approved a new type of stock called Class C common shares. These shares give holders a financial stake in the company but do not carry voting rights. The new class takes effect in January, and the company plans to use it for raising capital, paying employees, and funding acquisitions, including its AI initiatives. Importantly, this move keeps the existing voting structure intact. That structure currently gives Mark Zuckerberg control over about 60% of the vote, ensuring he retains decision-making power.

According to a recent report from the New York Times, there is a specific personal reason behind this corporate restructuring. The new nonvoting shares could help Zuckerberg pay for California's proposed billionaire tax if voters approve it. Since the new shares have no voting power, he could sell some of them to cover the tax bill without reducing his influence over company decisions. This strategy appears to be a direct response to the looming financial impact of the state's new proposal.

The tax in question is Proposition 40, which was drafted by tax law professors at Berkeley. It is sponsored by SEIU United Healthcare Workers West, the state's largest healthcare union. The proposal would impose a one-time 5% wealth tax on the net worth of several hundred billionaires who primarily live in California. Supporters argue the measure could generate up to $100 billion over five years. Most of that money would go toward state healthcare needs, with the remainder supporting food assistance and education programs.

The New York Times reports that Zuckerberg actively pushed the board to find a way to protect him from the tax. He told board members in September that if they could not agree on a plan, he would list his home in Palo Alto for sale. That move would likely have created a media storm. Shortly after those conversations, the plan for the new stock class came together, according to the newspaper.

This reporting is supported by a recent SEC filing from Meta. The document shows that concerns about Proposition 40 were discussed as early as July. The topic continued to appear in meetings and communications throughout July and August. The filing explains that Meta will give shareholders one Class C share for every Class A or Class B share they own. This is described as a one-time stock dividend, effectively a two-for-one split. The company notes that this dividend will not change the voting power of any shareholder.

The filing specifies that this dividend will allow Zuckerberg to sell or transfer up to 20% of his new Class C shares. That amount represents 10% of his total economic stake in the company. He can do this for any reason, including paying his potential tax liability under Proposition 40 if it becomes law. Because he holds majority voting control, selling these specific shares does not threaten his authority. Meta stated in its earnings press release that keeping Zuckerberg leading the company from California is crucial. It is important that he remains in close coordination with management and near Meta Superintelligence Labs.

Estimates suggest Zuckerberg could owe as much as $11 billion under the tax. The proposal has already upset many leaders in Silicon Valley. Google co-founder Sergey Brin has campaigned against it and spent significant money to defeat the measure. Other critics have called it economic suicide for the state, warning it will drive capital away. However, Meta's new strategy shows that large tech companies have creative ways to handle the tax if it passes. Representative Ro Khanna, a proponent of the tax, noted on X that billionaires will stay and figure out how to pay. He added that if Prop 40 passes, children in California can have healthcare.