Zuckerberg weighed leaving California over the wealth tax. Meta answered with a new class of stock

Key Points:

• Meta announced the issuance of a new Class C stock, a one-for-one stock dividend to all shareholders, designed to maintain Mark Zuckerberg's voting control while allowing the company to raise capital and pay a potential wealth tax without diluting his influence.
• The decision follows months of contentious negotiations between Zuckerberg and the board, centered on preserving his voting power amid plans to fund the AI expansion and prepare for California's Proposition 40 wealth tax, which could impose a multibillion-dollar liability on Zuckerberg.
• Unlike Class A shares that carry one vote per share, Zuckerberg's Class B shares have 10 votes each, giving him majority control; the new Class C shares will carry no votes but can be sold to raise funds or cover tax obligations without affecting his control.
• Meta's recent financial results showed strong revenue growth but a negative free cash flow due to heavy capital expenditures, highlighting the need for new funding mechanisms that do not compromise Zuckerberg's control or the company's AI investment plans.
• The new Class C shares will begin trading in late January 2027, with Zuckerberg allowed to sell 20% of these shares immediately, and additional shares issued to shareholders when the stock price doubles, subject to performance conditions; Meta currently has no specific financing plans tied to this share issuance.