Mark Zuckerberg threatened to flee California over a proposed billionaire tax, but now he's found a creative way to protect his multibillion-dollar fortune.
The Meta boss, worth an estimated $246 billion, has struck a deal that would let him sell a chunk of his shares while retaining his iron hold over the company, provided he commits to staying in California for eight years.
The arrangement comes as the Golden State prepares to vote on a controversial proposal that could see its wealthiest residents hit with a one-time levy on their fortunes.
The measure, known as Proposition 40, would impose a five percent tax on the assets of California residents worth more than $1 billion if voters approve it on November 3.
For Zuckerberg, 42, the potential bill could run into billions of dollars, prompting him to tell Meta's board that he was considering moving his primary residence out of the state.
But rather than risk losing its founder from the California headquarters, Meta has come up with a financial arrangement designed to keep him firmly in place.
Under the deal, the Facebook and Instagram owner will receive a new class of non-voting shares that he can gradually sell without sacrificing his voting power.
Zuckerberg will be able to sell a fifth of those new shares once they are issued, giving him a way to raise cash to cover a potential tax bill if the proposal passes.
Mark Zuckerberg has has struck a deal that would let him sell a chunk of his Meta shares while retaining his iron hold over the company
The deal is conditional on Zuckerberg remaining a company leader and living in California, or wherever Meta maintains its headquarters, for the next eight years
The structure will effectively allow him to cash out up to half of his economic stake over time while maintaining control of the company through his existing super-voting shares.
Those shares currently give him approximately 61 percent of Meta's voting power, meaning he can retain the final say over major corporate decisions even if he sells a significant portion of his financial interest.
The deal is conditional on Zuckerberg remaining a company leader and living in California, or wherever Meta maintains its headquarters, for the next eight years.
According to a regulatory filing, negotiations between Zuckerberg and a special committee of Meta's board were lengthy and, at times, contentious.
Directors ultimately concluded that keeping him at the helm was critical as the company pours enormous sums into artificial intelligence and battles rivals for dominance.
The new share structure is expected to be introduced through a two-for-one stock split, with the additional class of shares due to begin trading in January 2027.
Meta says the arrangement could also help it raise money for future acquisitions, infrastructure and AI development without diluting Zuckerberg's control.
The company's ambitions are hardly cheap, with internal forecasts indicating it may need to raise hundreds of billions of dollars over several years to finance its plans.
The proposed California tax has become a flashpoint in Silicon Valley, where some of the world's richest people are concerned about the prospect of paying a levy on wealth that can include company shares and other assets
Meta has already forecast capital spending of up to $145 billion for the full year as Zuckerberg pursues his vision of turning the social media giant into an AI powerhouse.
The spending spree comes with risks, however, after the company reported negative $2.1 billion in free cash flow during the third quarter, marking its first quarterly cash burn in at least a decade.
Its latest results nevertheless offered investors some encouragement, with revenue climbing 26 percent year over year to $64.6 billion.
Meta shares rose as much as 6.5 percent in after-hours trading following the earnings announcement before giving back some of those gains.
The proposed California tax has become a flashpoint in Silicon Valley, where some of the world's richest people are concerned about the prospect of paying a levy on wealth that can include company shares and other assets.
Supporters argue the measure could raise substantial funds, while critics warn that wealthy residents could relocate, potentially depriving the state of investment, jobs and future tax revenue.
Google co-founder Sergey Brin, DoorDash chief executive Tony Xu, investor Ron Conway and cryptocurrency billionaire Chris Larsen are among those reported to have spent millions opposing the proposal. Nvidia chief Jensen Huang, by contrast, has said he would not object to paying the tax.
California Governor Gavin Newsom has also opposed the measure, warning that a state-level wealth tax could encourage affluent residents to leave.
California Governor Gavin Newsom has voiced his opposition of the measure, warning that a state-level wealth tax could encourage affluent residents to leave
Zuckerberg's proposed arrangement is not the first time Meta has explored a share structure that would allow its founder to sell stock while retaining control.
The company abandoned a similar plan in 2017 after minority shareholders challenged it, arguing that it would widen the gap between Zuckerberg's voting power and his financial stake.
The latest proposal could also face scrutiny from investors concerned about corporate governance and the ability of founders to maintain control while selling their shares.
For now, Zuckerberg's deal highlights the extraordinary lengths Meta is prepared to go to keep its founder in charge as it enters an expensive new phase of competition.
And with California's billionaire tax heading towards a crucial vote, the outcome could have consequences extending well beyond one of Silicon Valley's most powerful residents.