This wonky maneuver kept Mark Zuckerberg from fleeing a California billionaire tax

By Christine Ji

Facing a potentially giant tax bill that could threaten his voting power, Zuckerberg was days away from listing his Palo Alto home when Meta agreed to create a new class of stock

Zuckerberg committed to remaining in California for eight years after an independent board committee authorized a non-voting Class C stock dividend.

Meta CEO Mark Zuckerberg threatened to leave California over a potential billionaire tax. But after months of negotiations, he's staying put - and Meta shareholders are about to see a whole new class of shares.

To fund the company's ongoing artificial-intelligence business expansion, Meta (META) established a new class of publicly traded, non-voting Class C common stock. Next January, existing shareholders will receive one share of Class C stock for each outstanding Class A and B share they hold.

But there's more to the story. The initiative was recommended by a special committee established by Meta's board to advise on the company's capital structure. Engineering a plan to raise equity while maintaining Zuckerberg's majority ownership of the company was no easy feat, especially with the specter of California ballot initiative Proposition 40 looming on the horizon, an SEC filing shows.

On Nov. 3, Californians will vote on a measure to levy a one-time 5% tax on residents worth over $1 billion. Zuckerberg, with a net worth of $247 billion, would face not only a tax bill but also a dilution of voting power if Proposition 40 passed. Nearly $240 billion of his wealth is tied up in Meta shares.

Zuckerberg currently holds 60.6% voting power over the company through his Class A stock and super-voting Class B shares. But as the committee discussed potential recapitalization methods in July, Zuckerberg flagged that he would need to sell his Class B shares to pay a potential billionaire tax, reducing his voting interest to roughly 53%, according to the filing.

As discussions progressed, Zuckerberg told the committee that he wouldn't consider changes to the terms of his voting shares and that he was considering establishing residency outside of California before the November election.

Negotiations over the structure of Class C shares dragged into September, with the committee offering a 1-for-9 dividend, meaning one Class C share for every nine existing shares. Zuckerberg told the board that he had failed to reach an agreement with the special committee and was planning to list his Palo Alto home for sale on Sept. 13.

Zuckerberg and the committee eventually settled on the current one-for-one Class C dividend. To ensure Zuckerberg remains sufficiently invested in the company, the committee "stapled" 80% of his Class C shares, meaning that Zuckerberg cannot sell them unless he also sells his super-voting Class B shares. Each quarter, 2.5% of Zuckerberg's stapled Class C shares will be released, requiring eight years for all of these shares to be freely sellable.

Zuckerberg is allowed to sell 20% of his new Class C shares, giving him liquidity to, among other things, pay a potential Proposition 40 bill.

Separately, as part of the company's new Founder Alignment agreement, the board negotiated with Zuckerberg to remain a resident of California for the next eight years, barring "material unforeseen circumstances."

Meta didn't immediately respond to MarketWatch's request for further comment.

-Christine Ji

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10-21-26 2048ET