Meta's Stock Split Strategy: A Loophole for the Billionaire Tax?

A new class of Meta stock may serve as a financial shield against California's looming wealth tax, allowing its founder to pay up without losing control.

During Meta's earnings call on Wednesday, the company announced that its board has approved Class C common stock, a nonvoting share set to take effect in January. While Meta stated the shares are intended for capital raising, employee compensation, and acquisitions—including its costly artificial intelligence initiatives—the New York Times reports a secondary motive: facilitating Mark Zuckerberg’s payment of California’s proposed billionaire tax. Because these shares carry no voting rights, Zuckerberg could sell them to cover tax liabilities while retaining his roughly 60% voting control.

Proposition 40, drafted by tax law professors at the University of California, Berkeley and sponsored by the state's largest healthcare union, would impose a one-time 5% wealth tax on hundreds of California-based billionaires. Proponents argue the measure could raise up to $100 billion over five years, primarily funding healthcare, with remaining revenues directed toward food assistance and education. Estimates suggest Zuckerberg could owe as much as $11 billion under this proposal.

According to the Times, Zuckerberg urged the board in September to devise a protective strategy, warning that he might list his Palo Alto home for sale if no agreement was reached. A subsequent SEC filing reveals that discussions about the tax began in July and continued through August. The filing details that the company will issue one Class C share for every Class A or B share held by investors, effectively creating a two-for-one stock split that leaves voting power unchanged.

The filing explicitly notes that this structure allows Zuckerberg to sell or transfer up to 20% of his newly acquired Class C shares, which equates to 10% of his total economic stake, specifically to pay potential tax liabilities under Proposition 40. Meta emphasized in a press release that retaining Zuckerberg in California is crucial for his coordination with management and the Meta Superintelligence Labs, ensuring he remains physically close to the company's operations.

The proposal has sparked significant debate among Silicon Valley leaders. Google co-founder Sergey Brin has aggressively campaigned against the measure, spending heavily to defeat it, while other critics argue it may drive capital out of the state. However, Meta’s new stock structure suggests that tech giants are finding creative ways to comply without ceding influence.

Democratic Representative Ro Khanna, a supporter of the tax, responded to the news on social media, stating that it appears billionaires intend to stay and find ways to pay. "If we pass Prop 40, poor California kids can have healthcare," Khanna wrote, signaling that the legislative battle remains intense despite corporate workarounds.