Meta creates new stock class to manage California’s proposed billionaire tax

Meta has unveiled a new class of nonvoting stock to help Mark Zuckerberg pay California’s proposed billionaire tax without losing control of the company. This move comes as part of a broader strategy to manage the potential impact of Proposition 40, a wealth tax that would hit the state’s billionaires if voters approve it. The new stock, called Class C, gives shareholders ownership but no vote, allowing Zuckerberg to sell part of his stake to cover the tax without giving up voting power.

Proposition 40 would level a one-time 5% wealth tax on the net worth of several hundred California billionaires who live primarily in the state. Backers estimate the policy could generate up to $100 billion over five years, which would be used to fund healthcare, food assistance, and education. Zuckerberg has been discussing the tax with Meta’s board since July, and the new stock plan was developed in response to the potential financial burden it would place on him.

Meta says the new stock will be used for capital raising, employee pay, and acquisitions, including its push into AI, while maintaining the current voting structure that favors Zuckerberg. The company’s recent SEC filing shows that the tax was a key factor in the decision to create the new shares. Zuckerberg has reportedly told board members that he would sell his Palo Alto property to avoid a media firestorm if the board did not act.

Meta’s earnings call revealed the approval of the new stock class, which will take effect in January. The company calls the plan a one-time stock dividend, which will not change the voting power of any shareholder. However, it will allow Zuckerberg to sell or transfer up to 20% of his new shares, representing 10% of his total economic stake, for any reason, including paying the billionaire tax without affecting his voting control.

The tax could cost Zuckerberg as much as $11 billion, and it has already riled many of Silicon Valley’s prominent businesspeople. Google co-founder Sergey Brin has campaigned against the measure, and other business leaders have criticized it as harmful to California’s economy. But the new stock plan shows that the state’s billionaires have creative ways of managing the tax, should it pass.