Meta stock split designed to keep Zuckerberg in California

Investing.com -- Meta Platforms (NASDAQ: META) announced Wednesday the creation of a new class of nonvoting stock to fund its AI expansion, following negotiations between CEO Mark Zuckerberg and the board over a proposed California wealth tax.

Proposition 40, proposed by a healthcare union, would levy a one-time 5% tax on the net worth of California residents with net assets of $1 billion or more as of Jan. 1 this year. California voters will decide on the measure on Nov. 3.

Zuckerberg told Meta's board he was evaluating whether to leave California in response to the proposed tax, according to a regulatory filing. If voters pass the measure, Zuckerberg would owe a "significant, multi-billion dollar tax payment" based on his Meta shares, the company said.

The new Class C shares will be issued to existing shareholders as a dividend. Zuckerberg's new shares will be "stapled" to his original shares, preventing him from selling them without also selling his voting shares. The shares will be gradually released from that arrangement over eight years.

Zuckerberg will be able to immediately sell up to 20% of his new Class C shares, representing 10% of his financial stake in Meta, "for any reason, including so that he may pay his potential tax liability under California Proposition 40, if enacted into law." He agreed to maintain primary residence in the same state as the company's headquarters for the next eight years, barring "material unforeseen circumstances."

Board members in June discussed forecasts showing the company needed to raise hundreds of billions of dollars to fund its AI ambitions, beginning as early as fall 2026, according to the filing.

In a July conversation with a board member, Zuckerberg said he had taken a $1 annual salary since 2013 and that his potential tax liability would require a share sale that would reduce his voting interest to about 53% from 60.6%.

Zuckerberg told board members later that summer he was considering establishing residence outside California before the election due to the wealth tax proposal. On Sept. 9, he told board members he intended to publicly list his Palo Alto home for sale in four days.

Days later, Zuckerberg signed a final agreement committing to remain in California or wherever Meta is headquartered for at least eight years. He did not list his Palo Alto home for sale.

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