Meta creates new shares so Zuckerberg can pay California tax without losing power

Meta has officially approved the creation of a new type of stock that will allow CEO Mark Zuckerberg to pay a significant portion of California’s proposed wealth tax without surrendering his control over the company. The board authorized Class C common stock, which grants an ownership stake in the business but carries no voting rights. This new class of shares is scheduled to take effect in January, providing a mechanism for the tech giant to raise capital, compensate employees, and fund acquisitions while preserving the existing voting structure that heavily favors its founder.

While Meta cited these standard corporate needs as the primary reason for the stock creation, reports from the New York Times suggest a more immediate driver: California’s Proposition 40. If voters approve the measure, Zuckerberg could sell these new nonvoting shares to cover his tax liability. Because the Class C shares do not come with voting power, selling them would reduce his economic stake in the company without altering his ability to direct company decisions. Currently, Zuckerberg controls approximately 60% of the voting power at Meta, a position this new structure is designed to protect.

Proposition 40 is a one-time 5% wealth tax targeting the net worth of several hundred billionaires who primarily reside in California. The proposal, drafted by tax law professors at Berkeley and sponsored by the state’s largest healthcare union, aims to generate up to $100 billion over the next five years. Supporters argue the funds will be critical for addressing the state’s healthcare needs, while the remainder will support food assistance and education programs. Estimates suggest that Zuckerberg alone could owe as much as $11 billion under this tax regime.

The strategy to protect the CEO’s voting influence was not a last-minute decision. According to a recent SEC filing, Zuckerberg began discussing the potential impact of the billionaire tax with Meta’s board members as early as July. The topic remained on the agenda through additional meetings and communications during July and August. The filing explicitly notes that the new dividend structure was designed to address these concerns. In September, Zuckerberg reportedly told the board that if they could not agree on a plan to mitigate the tax’s impact, he would consider selling his home in Palo Alto, a move that could have triggered significant media attention.

Under the approved plan, existing shareholders will receive one Class C share for every Class A or Class B share they currently hold. Meta describes this as a one-time stock dividend that effectively functions as a two-for-one stock split. The company emphasized in its filings that this distribution will not change the voting power of any shareholder. This mechanism is specifically tailored to allow Zuckerberg to sell or transfer a portion of his new holdings without disrupting the balance of power on the board.

The filing details that Zuckerberg will be permitted to sell or transfer up to 20% of the Class C shares he receives in the dividend. Because the dividend is a one-for-one distribution, half of his total post-dividend shares will be the nonvoting Class C type. Therefore, the 20% cap on Class C sales equates to 10% of his overall economic stake in the company. The filing states this allowance is intended to enable him to pay his potential tax liability under Proposition 40 if it is enacted, all while maintaining his majority voting control.

Meta has pointed to its recent earnings press release to explain the broader motivation behind the move, asserting that the Special Committee believes it is vital for Zuckerberg to continue leading the company from California. The company noted that his physical presence is crucial for staying in close coordination with management and for his proximity to Meta Superintelligence Labs. This justification underscores the company’s desire to keep its top executive in the state where a large portion of its operations and personnel are based.

The proposed tax has already become a major flashpoint in Silicon Valley, prompting aggressive campaigning by Google co-founder Sergey Brin, who has spent considerable resources attempting to defeat the measure. Other business leaders have criticized the proposal online, arguing it could drive capital out of the state. However, the unveiling of Meta’s stock strategy suggests that the state’s largest technology firms are developing sophisticated methods to manage the financial implications of the tax should it pass.

Democratic U.S. Representative Ro Khanna, a prominent supporter of the tax, reacted to the news by writing on the social platform X that billionaires appear ready to stay in California and find ways to pay. He added that if Proposition 40 is passed, the revenue will allow the state to provide healthcare for its children. The development highlights how corporate structures are evolving in response to potential state-level wealth taxes, creating new financial instruments that allow founders to manage tax burdens without diluting their influence.