Meta reaches deal with Zuckerberg to shield him from California billionaire wealth tax
Meta will issue non-voting shares to let Zuckerberg cover a potential tax bill while staying in California.
At a glance
- Meta created non-voting Class C shares so Zuckerberg can sell stock to cover a potential California wealth tax.
- Zuckerberg will remain a California resident for eight years under the agreement.
- Prop 40, a 5% tax on billionaires, faces voter approval in November with current polls showing it short of majority support.
Meta has reached an agreement with Mark Zuckerberg to protect the CEO from a potential California wealth tax that could force him to relocate. The social media company behind Facebook, Instagram and WhatsApp announced the arrangement on Wednesday night, confirming that Zuckerberg will remain a California resident for eight years.
Under the deal, Meta will create a new class of non-voting shares through a two-for-one stock split for all existing shareholders. This will allow Zuckerberg to sell some of the new Class C shares to cover a potential multibillion-dollar tax bill under Proposition 40, a one-time 5% tax on California’s roughly 250 billionaires set for a vote next month.
Zuckerberg, with a net worth of $239bn according to Forbes, had previously considered moving his primary residence out of California to avoid the tax liability. The new share structure would let him raise cash without diluting his voting control over the company.
Proposition 40 remains short of majority support in recent polling. Tech billionaires including Google co-founder Sergey Brin, Palantir co-founder Peter Thiel and former Google CEO Eric Schmidt have spent heavily opposing the measure.
In other financial news, Meta reported a 26% increase in quarterly revenue to $64.6bn, exceeding expectations of $63.3bn. However, profits dropped 37% to $13bn after a $9.9bn charge linked to a lawsuit over child protection and social media addiction.
Separately, a New Mexico judge ordered Meta to pay $25bn after a trial found the company misled the public about how it handled Facebook user data.
The company also disclosed its headcount fell to 66,775 by the end of September, a 15% decrease from the previous year.
Source: The Guardian Business.
Questions and answers
- What is Proposition 40?
- Proposition 40 is a California ballot measure proposing a one-time 5% tax on the state's roughly 250 billionaires.
- How does the Meta deal protect Zuckerberg?
- Meta will issue non-voting shares via a two-for-one split, letting Zuckerberg sell stock to pay any tax bill without losing voting control.
- What other financial results did Meta report?
- Meta posted a 26% rise in quarterly revenue to $64.6bn, though profits fell 37% to $13bn after a $9.9bn lawsuit charge.
