Meta CEO Mark Zuckerberg intends to retain control of the company he founded in 2004, and a new share class will help him do that.
On Wednesday, as Meta reported its third-quarter results, the company announced that it would issue a new class of Class C shares. The class of shares, which is technically a one-for-one stock dividend of new Class C shares, will be distributed to all shareholders. It was designed after months of extensive, sometimes contentious negotiations between Zuckerberg and board members including DoorDash CEO Tony Xu, Ambassador Robert Kimmitt and former Microsoft executive Charles Songhurst. Xu revealed his personal friendship with Zuckerberg but said it would not alter his judgment. At one point, the committee even talked about resigning if it couldn’t reach a resolution.
According to a Meta filing with the Securities & Exchange Commission, Zuckerberg wanted to be able to retain his voting control, fulfill his commitments to fund the Chan Zuckerberg Initiative with his Meta shares, and be prepared to pay billions to the state of California if a proposed wealth tax was approved by voters in November.
However, the proposed wealth tax came around the same time the company decided in late 2025 that Meta needed to raise outside capital to help fund the AI boom. Zuckerberg owns approximately 60.6% of Meta’s voting rights, while his stake represents approximately 13.4% of the company.
Like other large technology companies, Meta maintains a dual-class share structure, in which Class A shares trade on Nasdaq as a one-vote share. Conversely, Zuckerberg’s holdings are primarily made up of Class B shares, which carry 10 votes per share, allowing him to maintain majority control. The condition for the supercharged Class B shares is that if Zuckerberg sells them, they will be converted to Class A. Many companies require this condition for super-voting shares to ensure that outsiders don’t start taking control of the companies from cash-hungry founders.
The problem is that if Meta issues more Class A shares, which it does in order to grant shares to employees, make acquisitions or raise capital, Zuckerberg’s stake is diluted. Meta has long compensated for dilution with share buybacks, which helped increase its voting power from 53.7% in 2013 to 60.6% today. But buybacks also drain cash that Meta wants to use to fund AI development. The company’s SEC filings show that Meta repurchased $26.3 billion worth of Class A stock in 2025, but has not repurchased any shares in four consecutive quarters. Meanwhile, in the first nine months of this year, Meta recorded $21 billion in stock-based compensation.
Meta’s third-quarter results, released Wednesday, help explain why the stock class came to be. Revenue this quarter rose 26% to $64.6 billion, while capital spending reached $34.9 billion. At the same time, free cash flow fell to $2.1 billion from $10.6 billion a year ago. Meta also forecasts investments for 2026 of between $135 billion and $140 billion, which would bring the minimum to $130 billion. Meta forecasts fourth-quarter revenue of $73 billion to $76 billion.
As a solution to the crisis, the new Class C shares will not carry any voting rights, the company said. Meta will use them to pay employees, fund acquisitions and raise capital without Zuckerberg losing majority voting control. He can also sell some of them without giving up votes and, more importantly, pay a potentially huge wealth tax looming in California without having to dip into his Class B shares. His current level of control is such that he can personally elect all board directors and determine most of the issues put to a shareholder vote, which won’t change after the recapitalization. With the new shares, Zuckerberg can sell 20% immediately, and the remaining 80% is “stapled,” meaning he can only sell them if he sells or converts an equal number of his voting shares.
California’s Proposition 40, known as the wealth tax, is up for a vote on November 3 and if it passes, it could hit Zuckerberg and the state’s richest with a bill worth billions. The Bloomberg Billionaires Index ranks him fifth with a net worth of $246 billion. In July, Zuckerberg told Kimmitt, who is Meta’s lead independent director, that selling his Class B shares to cover what he might owe in wealth taxes could reduce his voting stake to 53%.
The tax came up in a conversation between the two men after negotiations between Zuckerberg and the committee appeared to become tense. The committee had suggested shareholder-friendly sunset provisions that would see Class B shares converted into common stock within a year of Zuckerberg’s eventual death or departure from Meta — or if he sold more than half of his stakes. During a call with Kimmitt in July, the two discussed the wealth tax and noted that Zuckerberg had only received $1 in salary from Meta since 2013.
Later that same month, Zuckerberg brought up Proposition 40 again, this time raising concerns about whether it could impact his ability to remain a California resident. The following week, Zuckerberg’s lawyers sent a letter requesting compensation similar to that paid to other tech founders, in part so Zuckerberg could pay a potential tax bill. Like SpaceX and Tesla CEO Elon Musk, many tech founders benefit from ambitious pay-for-performance programs, in which rigorous stock price growth is tied to huge salary hurdles. According to the filing, Zuckerberg refused to consider any changes to his voting stock, including sunset provisions, and told the committee that he was “considering establishing residency outside of California.”
The next day, the committee debated Zuckerberg’s position and reviewed Meta’s coverage and analyst comments, as well as tightening credit conditions for hyperscalers. Meta had seen relatively weaker demand for its July bond offering for a Texas data center. The committee wanted to keep Zuckerberg in California, near his artificial intelligence laboratory.
Later the same day, August 4, Zuckerberg proposed a dividend of 20 Class C shares for every Class A and B share, paid to all shareholders. He told the committee he would not agree to eliminate his Class B stock or support equity financing that would dilute his voting control.
Then he upped the ante.
Zuckerberg told the committee “that he intended to establish himself outside of California, which he had been advised to do before the November 3, 2026 election,” the filing said.
The committee met again on Aug. 5, but considered the 20-to-1 proposal “excessive,” the filing says. By the end of August, all parties were brought together after various proposals were put forward and rejected. Ultimately, committee members discussed dissolving the committee or resigning from the board if Zuckerberg did not make concessions for the benefit of all Class A shareholders.
At a board dinner on September 9, Zuckerberg told directors that he planned to put his Palo Alto estate up for sale on September 13. Committee members recused themselves from the dinner when it was updated. And then a few days later, a new proposal was made. Zuckerberg dropped his salary demand and agreed to keep the $1 salary and committed to staying in California or wherever Meta is headquartered for eight years. All shareholders receive another one-for-one Class C dividend each time the stock price doubles from $580.60, provided annual returns are at least 10%.
The agreement was signed on September 14. Each Class A and Class B share will receive one Class C share, a two-for-one split, and Zuckerberg will be able to sell 20% of his new Class C shares immediately. The committee approved days before the full board finalized the deal on Oct. 19. Chan Zuckerberg’s entities which hold 56% of the votes signed the next day and the new actions take effect on January 19, 2027.
Chief Financial Officer Susan Li said Wednesday that trading of the Class C shares would begin in late January. She said Meta does not yet have specific financing plans.
“We thought it was prudent to establish an appropriate capital structure framework to ensure that we had access to a diverse pool of funding sources,” she said on Wednesday’s call.
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