Meta Introduces Class C Shares to Preserve Zuckerberg's Voting Control

Meta announced on Wednesday, alongside third-quarter results, that Meta would introduce nonvoting Class C shares to help CEO Mark Zuckerberg preserve majority voting control. Every Class A and Class B share will receive one Class C share through a dividend, effectively creating a two-for-one stock split. The new shares take effect on January 19, 2027. Meta will use Class C shares for employee compensation, acquisitions and capital raising without reducing Zuckerberg's majority voting control.

Zuckerberg owns about 13.4% of Meta but controls about 60.6% of shareholder votes. Meta's Nasdaq-listed Class A shares carry one vote each, while Zuckerberg primarily holds Class B shares carrying 10 votes each. Zuckerberg's Class B shares become Class A shares when Zuckerberg sells the shares. Additional Class A issuance dilutes Zuckerberg's control, while buybacks helped increase Zuckerberg's voting power from 53.7% in 2013 to 60.6% now. Meta's SEC filings show that Meta repurchased $26.3 billion of Class A shares in 2025 but has made no repurchases for four consecutive quarters. Meta recorded $21 billion of stock-based compensation during this year's first nine months.

Meta's third-quarter revenue increased 26% to $64.6 billion. Capital expenditures reached $34.9 billion during the quarter. Free cash flow fell to negative $2.1 billion, compared with positive $10.6 billion a year earlier. Meta forecast 2026 capital expenditures of $135 billion to $140 billion, increasing the range's lower boundary from $130 billion. Meta projected fourth-quarter revenue between $73 billion and $76 billion. Meta decided in late 2025 that outside capital was needed for artificial intelligence investment, while buybacks consume cash Meta wants for that investment.

An SEC filing says Zuckerberg wanted to preserve voting control, fulfill commitments to finance the Chan Zuckerberg Initiative with Meta shares and prepare for a potential California tax bill. California voters will decide Proposition 40 on November 3, and the proposed wealth tax could impose multibillion-dollar bills on Zuckerberg and the state's wealthiest residents. The Bloomberg Billionaires Index ranks Zuckerberg fifth, with wealth of $246 billion. Zuckerberg told lead independent director Robert Kimmitt in July that selling Class B shares to meet a possible wealth-tax obligation could reduce Zuckerberg's voting stake to 53%.

Months of negotiations sometimes became contentious between Zuckerberg and directors, including DoorDash CEO Tony Xu, Ambassador Robert Kimmitt and former Microsoft executive Charles Songhurst. Xu disclosed a personal friendship with Zuckerberg but said the friendship would not compromise Xu's judgment. The committee proposed converting Class B shares into ordinary shares within a year after Zuckerberg's eventual death or departure, or if Zuckerberg sold more than half of Zuckerberg's holdings. Zuckerberg and Kimmitt discussed the wealth tax during a July call and noted that Zuckerberg had received only a $1 annual salary from Meta since 2013. Later in July, Zuckerberg questioned whether Proposition 40 would affect Zuckerberg's ability to remain a California resident. Zuckerberg's lawyers requested a compensation package the following week comparable to packages for other technology founders, partly to cover a possible tax bill. The filing says Zuckerberg rejected changes to voting shares, including sunset provisions, and said Zuckerberg was considering residence outside California.

The committee subsequently reviewed Zuckerberg's position, analyst commentary on Meta and tighter credit conditions for hyperscalers. Demand for Meta's July bond issuance for a Texas data center had been relatively weak. The committee wanted Zuckerberg to remain in California near Meta's artificial intelligence laboratory. On August 4, Zuckerberg proposed distributing 20 Class C shares for every Class A or Class B share to all shareholders. Zuckerberg told the committee that Zuckerberg would reject Class B sunset provisions and would not support equity financing that diluted Zuckerberg's voting control. The filing says Zuckerberg then stated an intention to establish residence outside California before the November 3, 2026 election, following advice about the necessary timing. The committee considered the 20-for-one proposal excessive on August 5, and committee members eventually discussed dissolution or board resignations if Zuckerberg refused concessions benefiting all Class A shareholders.

At a September 9 board dinner, Zuckerberg said Zuckerberg planned to offer the Palo Alto estate for sale on September 13, while committee members recused themselves during the update. A revised agreement emerged within days and was signed on September 14. Zuckerberg withdrew the compensation request, retained the $1 salary and committed to remain in California, or wherever Meta has its headquarters, for eight years. Zuckerberg may immediately sell 20% of the new Class C shares, while the remaining 80% can be sold only alongside an equal number of voting shares sold or converted. All shareholders will receive another one-for-one Class C dividend whenever the stock price doubles from $580.60, provided annual returns reach at least 10%. The committee approved the arrangement days before the full board approved the deal on October 19, and Chan Zuckerberg entities controlling 56% of votes approved the following day. The recapitalization preserves Zuckerberg's ability to elect every director and decide most matters submitted to shareholders. Chief financial officer Susan Li said on Wednesday that Class C trading would start in late January and that Meta had no specific financing plans, describing the structure as preparation for access to varied funding sources.