Meta Gives Zuckerberg Sellable Class C Shares for an Eight-Year California Pledge Ahead of Prop 40 Vote

Meta's disclosure on Wednesday night about its arrangement with Mark Zuckerberg has become the clearest corporate example of how California's proposed billionaire tax is changing behavior before a single vote is cast.

What the filing says

Zuckerberg told Meta's special committee he was "evaluating relocating his primary residence outside California." The filing adds that any visible step, including listing his California real estate, "would be public and inevitably noted and commented upon by Company employees and, accordingly, raise questions for management."

The committee's answer was to pay for his stay. Meta will create a new class of publicly listed, nonvoting Class C common stock, effective in January 2027, through a two-for-one split for all existing shareholders. Zuckerberg can sell those shares to raise cash without giving up the voting control that comes from the special shares he already holds.

Without the change, he could have been forced to sell voting shares to pay a Prop 40 bill, which would have reduced his control of the company.

In return, Zuckerberg committed to remain a California resident for eight years. If Meta moves its headquarters, he will move to that jurisdiction.

Restrictions on his ability to sell certain shares will be lifted gradually over those eight years, conditioned on his staying in a leadership role and living near the Menlo Park headquarters. Under the plan, he can immediately sell 20% of the Class C shares he receives, equal to 10% of his overall economic stake, and up to half of his economic stake over time.

Meta's stated reason: "The goal is to keep Mr. Zuckerberg continuing to lead the Company from California and in close proximity to Meta Superintelligence Labs." The company called his presence "critically important" during an era of "unprecedented challenge and competition in our industry."

The filing also says the new stock is meant in part to help Meta raise capital. The company says it needs to raise "hundreds of billions of dollars" over several years to fund AI growth. It acknowledged the arrangement carries the risk of a "significant, multi-billion dollar tax payment."

What Prop 40 would do

Proposition 40 would impose a one-time 5% tax on billionaires' assets and needs more than 50% of the vote on Nov. 3. Backers project it would raise about $100 billion over five years. About 90% would go to health care, with the rest for education, food assistance and administration.

Bloomberg's index puts Zuckerberg's net worth near $247 billion, which would mean roughly $12.4 billion owed. Forbes puts it at about $239 billion.

Stanford economists have questioned whether the tax could backfire, because several billionaires have already left the state. Their argument is that departures could shrink projected wealth-tax revenue and cut overall income tax collections.

The opposition list includes Google co-founder Sergey Brin, Palantir co-founder Peter Thiel, former Google CEO Eric Schmidt, investor Ron Conway, DoorDash CEO Tony Xu and crypto billionaire Chris Larsen. Breitbart, citing Politico, reported that Xu sits on the Meta special committee. Nvidia CEO Jensen Huang has said he would not mind paying.

Figma CEO Dylan Field has raised a structural objection. Founders hold illiquid private stock that is taxed on paper value, and they could owe the wealth tax without being able to pay it with that stock. Some could also face capital gains tax later, a "double tax event."

The other side

Supporters include Sen. Bernie Sanders, the ACLU of California, the California Federation of Labor Unions and the California Federation of Teachers. Rep. Ro Khanna, who represents California's 17th congressional district, called the measure a choice between standing with the working class or the oligarchs. "Every society is taxed. The only question is who will pay," he wrote.

New Republic writer Timothy Noah, who says he opposes the wealth tax on practical grounds, argued the Meta deal amounts to a raise. His case: Zuckerberg already owns homes outside California, including a $23 million Washington, D.C., house, a $170 million Miami-Dade estate and a Kauai compound. Noah also wrote that the tax never threatened Zuckerberg's control of Meta, only a reduction of his voting majority from 61 percent to 53 percent.

Meta's filing frames it differently, as a retention and control issue tied to AI competition.

The rest of Meta's week

The disclosure landed alongside a rough earnings report. Meta posted third-quarter revenue of $64.6 billion, up 26% and above the $63.3 billion analysts expected. Profit fell 37% to $13 billion after a $9.9 billion charge tied to its child-protection and social media addiction litigation.

A New Mexico judge separately ordered Meta to pay $25 billion after a trial found it misled the public about how it handled Facebook user data. Headcount stood at 66,775 at the end of September, down 15% from a year earlier.

Meta shares fell more than 6% at Thursday's open, as the Nasdaq dropped 2.5% in a broader selloff of AI-linked stocks.

What comes next

The Class C shares are set to take effect in January 2027. Voters decide Prop 40 on Nov. 3, and recent polling has shown it short of majority support.