Meta has struck a deal with Mark Zuckerberg that lets him pay California’s proposed billionaire tax without giving up control of the company, after the chief executive warned the board he was considering leaving the state if voters approve Proposition 40 next month. Under the agreement, detailed in a securities filing, Zuckerberg can immediately sell up to 20% of the new non-voting Class C shares he is about to receive, worth 10% of his overall economic stake, to cover a tax bill estimated at as much as $11 billion, while his roughly 60% voting control stays intact. In exchange, he has committed to remain a California resident for the next eight years.
A New Class Of Shares Built For Two Jobs
Meta’s board approved the Class C stock during Wednesday’s earnings call, as GEroundtable reported in its coverage of Meta’s third-quarter results. Every shareholder receives one Class C share for each Class A or Class B share owned, a one-time stock dividend that works out to a two-for-one split and takes effect in January. The shares carry an ownership stake but no vote; Meta will use them for capital raising, employee pay and acquisitions, including its AI push, while the voting structure favouring Zuckerberg stays as it is. The filing adds that the dividend “will not change the voting power of any shareholder.”
The second job became public afterwards. The Times reported there was another reason for the new class: because the shares carry no votes, Zuckerberg can sell a block of them to raise cash for the tax without diluting the control he holds through his supervoting Class B shares. Reuters put his net worth at about $240 billion, almost all of it tied up in Meta stock.
The Tax That Forced The Question
Proposition 40, drafted by Berkeley tax law professors and sponsored by SEIU United Healthcare Workers West, California’s largest healthcare union, would impose a one-time 5% wealth tax on the net worth of the several hundred billionaires living in the state. Backers say it could raise as much as $100 billion over five years, mostly for healthcare; a Stanford Hoover Institution estimate reported by USA Today suggests closer to $30 billion. Californians vote on November 3, and analysts say passage is far from certain in a state home to some 250 billionaires worth upwards of $2 trillion.
As far back as July, Zuckerberg was discussing the tax with board members, and the topic returned through August. Without non-voting shares to sell, paying a bill estimated at up to $11 billion would have meant selling voting shares and cutting the stake he controls Meta with. The Class C dividend instead gives him a pool of shares he can sell immediately, up to the 20% cap, “for any reason, including so that he may pay his potential tax liability under California Proposition 40, if enacted into law, without affecting his majority voting control,” as the filing puts it.
Months Of Pressure Behind The Scenes
The Times also reports that Zuckerberg pressed the board to produce a plan protecting him from the tax: in September he warned that without agreement he would list his Palo Alto property for sale, potentially setting off a media firestorm. The plan materialised soon after; USA Today reports the special committee approved it unanimously on October 14.
Asked for comment by TechCrunch, Meta pointed to a statement in its earnings release: “The Special Committee affirmed its belief that it was important for Mr. Zuckerberg to continue to lead the Company from California, including because it was crucial that Mr. Zuckerberg remains in close coordination with the Company’s management and in close proximity to Meta Superintelligence Labs.” The filing shows why the board dealt: Meta expects to raise “hundreds of billions of dollars” over several years to finance its AI growth plan.
Why It Matters
Meta’s arrangement shows how thoroughly the AI spending race now shapes even the personal finances of the people running it. A single ballot measure threatened to loosen the grip of the founder Meta’s board considers essential to its superintelligence push, so the company engineered a new class of stock that solves his tax problem, funds its own expansion and leaves control untouched. It also undercuts the loudest argument against Proposition 40. Google co-founder Sergey Brin has campaigned aggressively against the measure, which critics call economic suicide for California, yet Meta’s plan shows the state’s biggest companies can adapt if it passes. Representative Ro Khanna, a supporter of the tax, made that point on X: “Looks like billionaires will stay and figure out a way to pay the tax.” Meta has form for bending under pressure and emerging intact, as its delayed enforcement of new business terms after a publisher backlash showed this week; this time it moved first.
Background
Zuckerberg’s control rests on a dual-class structure in place since Meta’s 2012 stock market debut, giving him a majority of the vote with a minority of the shares. The Class C dividend takes effect in January 2027, so if Proposition 40 passes in November, the mechanism for paying the tax will be in place before any bill arrives.
Source: Reuters, TechCrunch
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