Meta grants Zuckerberg additional shares in bid to keep him in California

Meta has reached an agreement with Mark Zuckerberg that will provide the chief executive with additional shares and greater liquidity if California voters approve a proposed one-time tax on billionaires. The arrangement also commits Zuckerberg to remain a California resident, or live wherever Meta is headquartered, for eight years, according to reports by BBC News and the Guardian. The proposed measure, identified in the reports as Proposition 40, would impose a 5% tax on residents whose net worth exceeds $1bn.

Zuckerberg’s wealth is estimated differently by the two publishers: the BBC put it above $200bn, while the Guardian cited a Forbes estimate of $239bn. The BBC said his potential additional state tax bill could be about $10bn. Zuckerberg had told Meta’s board that he was considering moving his primary residence outside California and potentially selling property in the state.

The Guardian reported that he was concerned about having to sell voting shares to meet the liability if the measure passed. Meta’s agreement is intended to provide another way to raise the money without reducing his influence over the company. Meta is creating a new class of non-voting shares through a stock split.

The accounts differ slightly on the mechanics: the BBC described a new share being issued to each existing shareholder, while the Guardian described the move as a two-for-one split. Both agree that Zuckerberg will receive more shares that can be sold, while his voting control remains unchanged. The arrangement followed negotiations that Meta described in a financial disclosure as robust and, at points, contentious.

The company called it a “Founder Alignment Agreement” and said retaining Zuckerberg in California was critically important during what it described as a major transformation in the technology industry and global economy linked to artificial intelligence. The agreement appears to apply even if the proposed tax fails, and will last eight years provided Zuckerberg remains a resident of California, the BBC reported. The state is home to most major US technology companies.

The BBC cited an estimate of about 225 billionaire residents, while the Guardian referred to roughly 250 people who could be affected. The measure has faced opposition from wealthy technology figures. The Guardian reported that Google co-founder Sergey Brin, Palantir co-founder Peter Thiel and former Google chief executive Eric Schmidt have spent heavily campaigning against it.

Recent polling cited by the paper showed the proposal short of majority support, though voters were due to decide in November or early the following month according to the two reports. Meta’s agreement comes as the company expands its spending on artificial intelligence. The BBC said Meta planned to spend as much as $145bn on AI this year and had recorded negative cash flow for the first time since going public.

The Guardian reported quarterly revenue rose 26% to $64.6bn, but profit fell 37% to $13bn after a $9.9bn charge linked to litigation over child protection and social media addiction. Investors reacted negatively to the spending outlook and wider concerns about AI-linked companies. Meta shares fell by more than 6% when Wall Street opened, according to the Guardian, while the BBC reported a fall of more than 7%, eliminating over $100bn from the company’s market value.

The company also reported that its workforce had fallen by 15% from a year earlier.