Meta has discovered a way for Mark Zuckerberg to sell a portion of his ownership while maintaining significant control over the firm. The creation of a new class of share with no voting rights may also support the company’s increasing AI initiatives.
According to reports from Reuters on October 22, the deal comes in the wake of Zuckerberg’s concerns regarding a forthcoming tax on wealthy residents of California. As for investors, it brings to the surface the age-old dilemma of how much authority founders must keep hold of as their companies expand.
Non-voting shares, same votes
According to Meta’s SEC filing, shareholders will receive one non-voting Class C share for every Class A or Class B share they own. The arrangement effectively doubles their shares without changing their voting power. The new stock structure is set to take effect on January 19, 2027.
Zuckerberg can immediately sell 20% of his Class C shares, worth roughly 10% of his economic stake. Restrictions on the rest ease over eight years if he continues serving Meta. He also agreed to remain a resident of California, or wherever Meta is headquartered, subject to exceptions.
The independent committee explained why it supported the arrangement:
“critically important to keep Mr. Zuckerberg in a leadership position with our Company”
The tax bill behind the deal
California’s Proposition 40 proposes a one-time 5% wealth tax on qualifying billionaires who lived in the state on January 1, 2026. Voters will decide on November 3. Most proceeds would fund public health care.
Zuckerberg had considered leaving California over concerns that the tax could force him to sell voting shares.
As of October 1, he had ownership of 60.6% of Meta’s voting rights, while his stake in the company’s financial assets was only 13.4%. Class C share sales would provide him with funds while retaining ownership of the voting stake. The proposed tax hasn’t been passed yet as a law.
Financing an AI buildout
It is projected that Meta will require hundreds of billions of dollars in financing in the coming years. Class C shares would give the company another way to raise money, make acquisitions, and pay employees without losing voting power.
Meta’s most recent quarterly earnings reveal its vast expenditure. The company made $64.60 billion in revenue and earned a net income of $9.86 billion. The company spent $34.91 billion on capital expenditures, while free cash flow came in at negative $2.12 billion. Overall, the company expects its yearly capital expenditures to be between $135 billion and $145 billion.
Meta is part of a larger race for overall AI expenditure. As Cryptopolitan reported, total capex among five top US cloud players has increased from $485 billion in January to around $730 billion in July. The biggest challenge lies in generating enough revenue to justify such spending. Bain estimates that the AI business sector will have to generate $6 trillion in annual revenue by 2031 in order to support the construction. This is a revenue target, rather than a construction cost estimate.
Where the discount risk sits
Meta acknowledges that Class C shares could trade below voting Class A shares. If that happens, raising the same amount of money could require issuing more stock, diluting existing shareholders’ economic interests.
The concern goes beyond Meta. A Columbia Law analysis cites Lucian Bebchuk and Kobi Kastiel, who warned in their research:
“the potential advantages of dual-class structures … tend to recede, and the potential costs tend to rise”
An OECD report similarly calls for safeguards around unequal voting rights.
Meta is betting that its AI investments will reward shareholders. Whether those returns justify Zuckerberg’s continued control remains an open question.
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