Meta has introduced a new class of nonvoting shares that could allow founder and chief executive Mark Zuckerberg to raise money to pay a proposed California billionaire tax without surrendering his control of the company.

The announcement followed Meta’s earnings call on Oct 21, during which the company revealed that its board had approved the creation of Class C common stock.

The shares will carry an ownership stake but no voting rights and are expected to take effect in January.

Meta said the new stock could support fundraising, employee compensation and acquisitions, including investments in artificial intelligence, while preserving the existing voting structure that gives Zuckerberg approximately 60 per cent of the company’s voting power.

Reports indicate that the new share structure could also help Zuckerberg respond to California’s proposed Proposition 40, a measure that would introduce a one time wealth tax of five per cent on the net worth of several hundred billionaires who primarily reside in the state.

The proposal was developed by tax law professors at the University of California, Berkeley, and is backed by the healthcare union SEIU United Healthcare Workers West.

Supporters estimate that the measure could generate as much as $100 billion over five years, with most of the money directed towards healthcare and the remainder supporting food assistance and education.

According to reports, Zuckerberg discussed the proposed tax with Meta board members as early as July and continued raising the issue during meetings and communications in August.

He reportedly pressed the board to develop a strategy to protect him from the potential financial impact, even suggesting in September that he might put his Palo Alto property up for sale if an agreement could not be reached.

Meta subsequently developed the new stock structure. Under the plan, shareholders will receive one Class C share for every Class A or Class B share they own, effectively creating a two for one stock split without changing their existing voting power.

Meta’s regulatory filing explains that the arrangement would allow Zuckerberg to sell or transfer up to 20 per cent of the Class C shares he receives.
Because the dividend would double his total shareholding while dividing it between voting and nonvoting classes, the permitted sale would represent approximately 10 per cent of his overall economic stake in Meta.

The filing specifically states that the arrangement could allow him to pay a potential liability under Proposition 40 without affecting his majority voting control.

Estimates suggest that Zuckerberg’s tax bill could reach approximately $11 billion if the proposal becomes law.

The proposed tax has generated strong opposition among some of Silicon Valley’s wealthiest business leaders, including Google co founder Sergey Brin, who has reportedly spent heavily campaigning against it.

Critics argue that the measure could encourage wealthy individuals and businesses to move their assets or operations out of California, potentially harming the state’s economy.

However, supporters believe the revenue could provide significant funding for essential public services.

Democratic Representative Ro Khanna, who supports the proposal, argued that the developments surrounding Meta’s new share structure suggest wealthy individuals could find ways to meet their obligations while remaining in California.

Source: TechCrunch