Meta’s board has approved a new class of nonvoting common stock, a structure that gives CEO Mark Zuckerberg a way to convert part of his economic stake into cash without surrendering his grip on the company. The Meta Class C stock, which takes effect in January, arrives as California weighs a one-time 5% wealth tax on billionaires known as Proposition 40.
How the Class C Dividend Works
The company will issue Class C shares as a one-time stock dividend, giving shareholders one Class C share for every Class A or Class B share they own. The ratio equates to a two-for-one stock split, but with a crucial difference: the new shares carry no voting rights. Meta says the dividend will not alter any shareholder’s voting power.
Beyond the tax question, Meta intends to use Class C stock for general corporate purposes, including capital raising, employee compensation, acquisitions and investment in artificial intelligence.
Zuckerberg's Grip on the Vote
Zuckerberg controls roughly 60% of Meta’s votes, a level of dominance that makes the nonvoting shares especially useful to him. Under the plan, he may sell or transfer up to 20% of his Class C shares, equal to about 10% of his overall economic stake, without diluting his majority control.
The New York Times reported that covering a potential Proposition 40 liability was one motivation behind the stock class. According to the Times, Zuckerberg pressed the board for a plan to protect him from the tax, beginning discussions in July and continuing through July and August. In September, he reportedly threatened to list his Palo Alto property for sale. Not long afterward, the stock plan materialized.
The SEC Filing and Proposition 40
A Meta SEC filing documents those concerns, explicitly referencing Proposition 40 in its discussion of the stock class. The filing states that sales of Class C shares may cover a potential tax liability.
Proposition 40 would impose a one-time 5% wealth tax on several hundred billionaires primarily living in California. Backers estimate it could raise up to $100 billion over five years, with most revenue directed to healthcare and some to food assistance and education. The measure was drafted by Berkeley tax law professors and is sponsored by SEIU United Healthcare Workers West. It has not yet been enacted.
Zuckerberg’s estimated tax liability could reach $11 billion, according to the brief.
Why Meta Wants Him in California
Meta says keeping Zuckerberg in California is important, citing proximity to Meta Superintelligence Labs. The company’s special committee affirmed that view in the filing.
A Split Silicon Valley
Opposition to Proposition 40 has been vocal. Google co-founder Sergey Brin has campaigned and spent against the measure. Critics argue the tax could trigger capital flight from California, with some calling it economic suicide for the state.
Supporters include U.S. Rep. Ro Khanna, a Democrat, who said billionaires will stay and find a way to pay. Khanna linked the tax to healthcare for poor California children.
Whether Proposition 40 passes remains uncertain, as does the exact amount Zuckerberg would owe and whether he will actually sell shares. What is clear is that Meta has built a mechanism that lets its founder convert economic value into cash while leaving his voting control intact.
