Meta Creates Nonvoting Class C Stock to Protect Zuckerberg's Control
Meta will issue a new class of nonvoting shares, allowing CEO Mark Zuckerberg to fund the Chan Zuckerberg Initiative, pay a potential California wealth tax, and support AI spending without diluting his 60.6% voting control.
Meta will issue a new class of nonvoting stock, the company announced alongside its third-quarter earnings, in a move designed to let CEO Mark Zuckerberg sell shares without eroding his majority voting control. The Class C shares will be distributed to all shareholders as a one-for-one stock dividend and carry no votes, according to a company filing with the Securities and Exchange Commission.
The arrangement addresses a financial squeeze at the center of Meta's AI buildout. Zuckerberg holds roughly 13.4% of the company's equity but about 60.6% of its voting power, largely through Class B shares that carry 10 votes each. Those super-voting shares convert to Class A stock if sold, so any sale by Zuckerberg would reduce his control. Meta has historically offset dilution from employee equity grants and acquisitions with stock buybacks, which helped lift his voting stake from 53.7% in 2013 to its current level. But buybacks consume cash the company now wants for data centers and computing infrastructure. Meta repurchased $26.3 billion in Class A stock in 2025 but has not bought back shares in four consecutive quarters, while stock-based compensation reached $21 billion in the first nine months of this year.
The new shares give Zuckerberg a way out of that bind. He can sell Class C stock to fund his pledges to the Chan Zuckerberg Initiative and to cover a potential multibillion-dollar California wealth tax bill without touching his Class B holdings. He can sell 20% of the new shares immediately; the remaining 80% are stapled, meaning they can be sold only alongside an equal number of voting shares. The company said it will use the new stock to pay employees, fund acquisitions, and raise capital without changing Zuckerberg's control, which allows him to elect all board members and determine most shareholder votes.
The decision followed months of negotiations between Zuckerberg and a special board committee that grew contentious at times. The committee included DoorDash CEO Tony Xu, Ambassador Robert Kimmitt, and former Microsoft executive Charles Songhurst. At one point, members discussed resigning if no resolution could be reached, according to the filing. The committee proposed sunset provisions that would convert Zuckerberg's Class B shares into regular stock within a year of his death or departure from Meta, or if he sold more than half his holdings. Zuckerberg refused to consider any changes to his voting shares.
California's proposed wealth tax, known as Proposition 40, is central to the timing. The measure goes before voters on Nov. 3 and, if approved, could hit the state's wealthiest residents with multibillion-dollar bills. Zuckerberg, whose net worth is listed at $246 billion, told Kimmitt in July that selling Class B stock to cover the tax could cut his voting stake to 53%. He later raised concerns about whether the tax might affect his ability to remain a California resident, and his lawyers sent a letter requesting a performance-based pay package similar to those granted to other tech founders, partly to help cover a potential tax bill. The filing states that Zuckerberg told the committee he was considering establishing residence outside California.
The recapitalization comes as Meta's spending on artificial intelligence reshapes its finances. Third-quarter revenue rose 26% to $64.6 billion, while capital expenditures reached $34.9 billion and free cash flow fell to negative $2.1 billion from $10.6 billion a year earlier. Meta forecast 2026 capital spending of $135 billion to $140 billion and fourth-quarter revenue of $73 billion to $76 billion. The company said it needed to raise outside capital to help fund the AI boom, a decision that coincided with the wealth tax debate. The new share class is intended to let it do so without loosening Zuckerberg's grip on the company he founded in 2004.
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