Meta creates new non-voting shares to help CEO pay proposed state tax

Meta’s board has approved a new class of non-voting shares, a move that provides a strategic solution for the company’s CEO to handle potential state tax liabilities. The new Class C common stock, effective in January, grants holders an ownership interest without a vote on corporate decisions, ensuring the existing voting structure remains intact.

According to a recent report by The New York Times, the primary driver behind this new share class is to help Mark Zuckerberg pay for California’s proposed billionaire tax if voters approve it. Because the new shares carry no voting rights, Zuckerberg can sell a portion of them to cover the tax bill without ceding his approximately 60% voting control over the company. The plan was reportedly pushed by Zuckerberg, who told board members in September that if an agreement could not be reached, he might list his Palo Alto property for sale, a move expected to attract significant media attention.

The measure, known as Proposition 40, was drafted by tax law professors at the University of California, Berkeley, and is sponsored by SEIU United Healthcare Workers West. It proposes a one-time 5% wealth tax on the net worth of hundreds of California-based billionaires. Supporters argue the policy could raise up to $100 billion over five years, with the majority of funds directed toward healthcare and the remainder allocated to food assistance and education. Estimates suggest Zuckerberg could be liable for as much as $11 billion under this proposal.

Meta’s recent SEC filing confirms that discussions regarding the tax began as early as July, with the topic recurring in board meetings and communications throughout August. The filing details that Meta will issue a one-time stock dividend, giving shareholders one Class C share for every Class A or Class B share they own, effectively acting as a two-for-one stock split. This dividend will not alter the voting power of any shareholder, allowing Zuckerberg to immediately sell or transfer up to 20% of his new Class C shares, which represents 10% of his overall economic stake, specifically to pay any potential tax liability.

In a statement to TechCrunch, Meta reiterated that a key motivation for the new stock class is to ensure Zuckerberg remains in California to lead the company. A quote from the earnings press release noted that it is crucial for Zuckerberg to stay in close coordination with management and in proximity to Meta Superintelligence Labs. The board’s Special Committee affirmed that keeping the CEO in the state is important for the company’s strategic direction.

The proposed tax has sparked significant debate among Silicon Valley leaders, with Google co-founder Sergey Brin actively campaigning against the measure and spending substantial funds to defeat it. Critics have warned that the tax could trigger capital flight, potentially harming the state’s economy. However, the creation of the new stock class suggests that major tech companies are developing creative financial structures to manage the impact.

Democratic Representative Ro Khanna, a vocal supporter of the tax, responded to the news on X, suggesting that billionaires are prepared to stay and find ways to pay. He added that if Prop 40 passes, the revenue will ensure healthcare access for children in California, highlighting the ongoing political battle surrounding the measure as the November vote approaches.