Meta has agreed to help Mark Zuckerberg pay a potential California wealth tax by creating a new class of non-voting shares he can sell without losing control of the company. The arrangement, revealed on Wednesday night, commits Zuckerberg to remain a resident of California, where Meta's headquarters are located, for eight years. According to Forbes, Zuckerberg is worth $239bn.
Californians will vote early next month on Proposition 40, a one-off 5% tax on roughly 250 billionaires living in the state. Zuckerberg told Meta he was considering moving his primary residence elsewhere because the tax could expose him to a massive liability and potentially force him to sell voting shares to pay it. Meta's response is a two-for-one stock split that creates a new class C of non-voting shares for all existing shareholders, allowing Zuckerberg to sell some of these shares to cover a potential tax bill while keeping voting control intact.
Recent polling has shown that Prop 40 remains short of majority support among voters. Tech billionaires including Google co-founder Sergey Brin, Palantir co-founder Peter Thiel and former Google CEO Eric Schmidt have spent heavily to fight the measure. US congressman Rohit Khanna, representing California's 17th congressional district, has described Prop 40 as a choice between standing with the working class or the oligarchs.
Beyond the tax dispute, Meta reported a 26% rise in revenues for the last quarter to $64.6bn, beating expectations of $63.3bn. However, profits fell 37% to $13bn, dragged down by a $9.9bn charge related to Meta's lawsuit over child protection and social media addiction failings. On Wednesday, a judge in New Mexico also ordered Meta to pay $25bn following a trial that found the company had misled the public about how it handled Facebook user data. Meta cut its headcount to 66,775 at the end of September, 15% fewer than a year earlier.
For investors in Meta, the deal removes uncertainty about whether the company's chief executive might relocate, which could affect business continuity and the company's California tax position. For Californians considering Prop 40, the arrangement illustrates how billionaires can structure their finances to limit their tax exposure.