Meta strikes deal to keep Zuckerberg in California amid billionaire tax plan
The agreement gives Mark Zuckerberg more Meta shares as California considers a one-time 5% tax on billionaires that could cost him about $10bn.
At a glance
- Meta agreed a deal to keep CEO Mark Zuckerberg in California as a proposed 5% billionaire tax goes before voters in November.
- The deal gives Zuckerberg more Meta shares and quarterly sales but not more control; it lasts eight years while he remains in California.
- Meta plans up to $145bn in AI spending and posted negative cash flow; its shares fell over 7%, cutting over $100bn from market value.
Meta has struck an agreement with chief executive Mark Zuckerberg designed to keep him in California while the state considers a proposed one-time 5% tax on billionaires, according to a Wednesday financial disclosure.
The deal would give Zuckerberg, whose fortune is estimated at more than $200bn (£149bn), additional Meta shares to offset wealth he could lose if voters approve the tax in November. The measure would apply to residents with a net worth above $1bn, and Zuckerberg would likely owe about $10bn in extra state taxes.
Zuckerberg told Meta's board last month that he was considering moving his primary residence out of California and possibly selling property there. His main California homes are in Palo Alto and Lake Tahoe. He said such a move would be public, would be noticed by employees and would raise questions about management.
Deal details
Meta responded by creating a 'Founder Alignment Agreement,' negotiated with a special committee in talks described as 'robust' and, at several points, contentious. Under a stock split announced Wednesday, Meta created a new type of stock and gave one new share to each existing shareholder. Zuckerberg will receive more stock more often and can sell on a quarterly basis.
The shares do not change his level of control over Meta, but they let him cash in more easily. The deal is effective even if California's tax does not pass and runs for eight years, as long as Zuckerberg remains a California resident. Meta said keeping him leading from California was 'critically important' given the AI-driven transformation in tech and the global economy.
California is home to about 225 billionaires, according to the campaign group Americans for Tax Fairness. Zuckerberg's estimated effective California tax rate has been less than 1% a year, the source says.
Meta pointed to the pandemic period, when Zuckerberg worked largely from his Hawaii compound, as an example of the risks of him being outside the state. The company later faced a whistleblower scandal, a metaverse pivot and mass layoffs. Its headcount is down 15% from a year earlier, a reduction of at least 10,000 workers.
AI spending
Meta now focuses on AI. It plans to spend as much as $145bn on AI projects this year and has posted negative cash flow for the first time since going public 14 years ago. CFO Susan Li said the stock split would also give Meta more ways to finance future AI spending. Investors appeared unsettled: Meta shares fell more than 7% on Thursday, wiping more than $100bn from its market value.
Source: BBC Technology.
Questions and answers
- What is California's billionaire tax proposal?
- It is a one-time 5% tax on California residents with a net worth above $1bn, due to go before voters in November. Zuckerberg would likely owe about $10bn in additional state taxes.
- Why did Meta give Mark Zuckerberg more shares?
- Meta said the 'Founder Alignment Agreement' was meant to keep him leading the company from California and to offset any wealth he might lose if the tax passes. The deal also lets him sell stock quarterly without changing his control.
- How is Meta's AI spending affecting its finances?
- Meta plans to spend as much as $145bn on AI this year and has posted negative cash flow for the first time since going public. Its shares fell more than 7% on Thursday, wiping over $100bn from its market value.
