Meta Approves Non-Voting Shares Alongside Zuckerberg’s Eight-Year Residency Pledge

Meta has approved a new class of non-voting shares under an agreement in which Mark Zuckerberg committed to remain a California resident, or live wherever the company is headquartered, for eight years. The residency pledge applies so long as he serves full-time on Meta’s executive team or as executive chair, and allows an exception for “material unforeseen circumstances” making it prudent or advisable to live elsewhere.

The structure is expected to let Zuckerberg pay a potential California wealth-tax bill without selling voting shares and losing control of Meta, according to its regulatory filing. Proposition 40, if approved by voters, would impose a one-time 5% tax on the wealth of California residents worth more than $1 billion (£0.75 billion).

Before the agreement, Zuckerberg told Meta directors he was considering leaving California and selling or listing his Palo Alto home. Meta’s special committee considered his continued leadership from California critical to the company’s strategy and stability, citing his proximity to management and Meta Superintelligence Labs during the AI transition.

Selling shares, retaining control

Existing shareholders are to receive one new Class C share for each share they hold—a one-for-one dividend that effectively amounts to a two-for-one split. Meta plans to issue the non-voting Class C shares in January 2027. Meta says the arrangement preserves the voting power of existing Class A and Class B shares and protects the founder-led model it credits with its success.

Zuckerberg controls about 60.6% of Meta’s voting power while holding roughly 13.4% of its economic stake, according to a regulatory filing. His superior voting power rests largely on Class B shares, which carry 10 votes each. Selling those shares to cover a tax bill could reduce his voting majority.

Under the agreement, Zuckerberg can “immediately sell or transfer up to 20%” of his newly issued Class C shares, representing 10% of his economic stake, without reducing his majority voting control. The remaining 80% is initially restricted, with sales generally requiring matching voting-share sales or conversions, or credits from earlier transactions. At each quarter-end, starting with the first full quarter after payment, restrictions lift on 2.5% of the Class C shares issued to his group in the dividend if he served full-time on Meta’s executive team or as executive chair throughout that quarter.

The BBC, Los Angeles Times and Seattle Times have reported estimates of a potential tax liability for Zuckerberg of roughly $10 billion (£7.47 billion) to $12 billion (£8.96 billion) if Proposition 40 passes. Those estimates apply the proposed levy to his reported wealth, which exceeds $200 billion (£149 billion). Under the proposal, it would apply to billionaires who were California residents on January 1, 2026, and the valuation date would be December 31, 2026. Real estate, pensions and retirement accounts generally would be excluded.

Meta says it would be misleading to attribute the creation of Class C shares to a single reason. The company says they are intended to expand its funding options for AI investment, employee compensation, acquisitions and other corporate purposes without diluting Zuckerberg’s voting control.

Meta expects capital expenditures of $135 billion (£101 billion) to $145 billion (£108 billion) this year as it invests in AI infrastructure and products. Even as third-quarter revenue rose 26% to about $64.6 billion (£48.2 billion), free cash flow turned negative: minus $2.1 billion (£1.57 billion), compared with positive $10.6 billion (£7.91 billion) a year earlier.

Meta forecasts that its AI businesses will begin adding incremental revenue in 2027 and become a meaningful source of revenue diversification over time.

California’s tax argument

A recent Citrin-Politico poll cited by CNBC put support for Proposition 40 at 46%, with 43% opposed. The anti-tax committee Building a Better California has raised more than $333 million (£249 million), compared with $32.7 million (£24.4 million) for the Yes on 40 campaign, according to The Seattle Times.

Supporters, including SEIU United Healthcare Workers West, argue that ultra-rich residents should pay their fair share toward public needs. They say Proposition 40 could raise roughly $100 billion (£74.7 billion) for healthcare, with a portion also directed to education and food assistance.

Governor Gavin Newsom and other opponents warn that the tax could drive wealthy residents and capital out of California. Their concern reaches beyond the immediate levy: they say departures could reduce income-tax receipts and produce future budget problems for the state.

Suzanne Jimenez of SEIU United Healthcare Workers West points to Zuckerberg’s eight-year commitment under the agreement as evidence that undercuts claims of billionaires fleeing California.