Key Takeaways:
- New Shares: Meta introduces nonvoting Class C shares to support fundraising.
- Voting Control: Zuckerberg protects his majority voting power.
- Key Drivers: Rising AI costs and California’s proposed wealth tax influence the move.
Meta Platforms will issue a new nonvoting stock class in January 2027 to raise capital, fund artificial intelligence expansion, and protect CEO Mark Zuckerberg’s voting control amid financial pressures and California’s proposed wealth tax.
Meta announced the restructuring Wednesday alongside its third-quarter earnings. The move allows the company to issue shares for employee compensation, acquisitions and fundraising without significantly diluting Zuckerberg’s control over the social media giant.
Meta Creates Nonvoting Shares to Support Expansion
The new Class C shares will carry no voting rights and will be distributed to existing Class A and Class B shareholders on a one-for-one basis. The distribution effectively creates a two-for-one stock split, with the new shares expected to take effect Jan. 19, 2027.
Zuckerberg holds approximately 60.6% of Meta’s voting power despite owning about 13.4% of the company. His Class B shares carry 10 votes each, while publicly traded Class A shares carry one vote each.
Under the restructuring, Zuckerberg can sell 20% of his newly distributed Class C shares immediately. The remaining 80% are subject to restrictions, allowing sales only alongside the sale or conversion of an equivalent number of his voting shares.
Meta Chief Financial Officer Susan Li said the company had established the structure to improve its financing flexibility.
“We thought it was prudent to establish the appropriate capital structure framework to ensure that we have access to a diverse pool of funding sources,” Li said during Wednesday’s earnings call.
Rising AI Costs Drive Meta’s Financing Strategy
Meta’s growing investment in artificial intelligence has increased pressure on its finances, prompting the company to explore additional funding options.
The company reported third-quarter revenue of $64.6 billion, up 26% year over year. However, capital expenditures reached $34.9 billion, while free cash flow turned negative at $2.1 billion, compared with $10.6 billion a year earlier.
Meta raised its lower-end capital expenditure forecast for 2026 to $135 billion, from $130 billion, and maintained an upper estimate of $140 billion. The company also projected fourth-quarter revenue between $73 billion and $76 billion.
Meta has historically used stock buybacks to offset shareholder dilution. However, it repurchased $26.3 billion in Class A shares in 2025 and has not bought back shares in four consecutive quarters, according to company filings.
The new structure could help preserve cash for AI infrastructure as Meta expands its computing capacity and data center investments.
Wealth Tax Concerns Intensify Zuckerberg’s Push
The restructuring also addresses Zuckerberg’s concerns about California’s proposed wealth tax, which could expose the billionaire to a multibillion-dollar tax liability if approved by voters Nov. 3.
According to Meta’s filing with the Securities and Exchange Commission, Zuckerberg told directors he was “considering establishing residence outside of California” while negotiations over the share structure continued.
He reportedly warned that selling voting shares to cover a potential tax bill could reduce his voting stake to approximately 53%. The filing also said he raised concerns about remaining a California resident before the election.
Negotiations between Zuckerberg and a board committee became contentious, with directors discussing potential limits on his supervoting shares. The committee considered provisions that could eventually convert his Class B shares into ordinary stock under certain circumstances.
Zuckerberg ultimately dropped his request for a new pay package and agreed to retain his $1 annual salary. He also committed to remaining in California or wherever Meta is headquartered for eight years.
The agreement includes additional one-for-one Class C share distributions whenever Meta’s stock price doubles from $580.60, provided annual returns reach at least 10%.
The board approved the deal on Oct. 19, and the restructuring received backing from Chan Zuckerberg entities holding 56% of the company’s voting power.
