Tech and AI

Meta creates non-voting Class C shares and a deal that keeps Zuckerberg in California if a billionaire tax passes

By Staff Writer  |  23 October 2026

The new shares are meant to fund Meta's AI spending without diluting its founder's control, and the stock fell about 7 per cent after free cash flow turned negative.

Meta Platforms will create a new class of publicly listed, non-voting Class C shares and give one to every holder of its existing shares, the company said with its third-quarter results on Wednesday. The amended certificate of incorporation that creates them is due to take effect on 19 January 2027. Meta expects the price of its Class A shares to adjust as it would after a two-for-one stock split, and the dividend will not change any shareholder's voting power.

Alongside the new class, Meta has entered into what it calls a Founder Alignment Agreement with Mark Zuckerberg. According to the company's filing, he has committed to remain resident in California for eight years and may sell up to 20 per cent of the Class C shares he receives straight away, for any reason, including to meet a tax bill under Proposition 40 if it becomes law.

The ballot measure

Proposition 40 would impose a one-time tax of 5 per cent on California residents worth more than 1 billion dollars, and it goes to voters on 3 November. Zuckerberg told Meta last month that he was considering moving his main residence out of the state because of the measure. Meta's special committee of independent directors said in the filing that it wanted his leadership to continue, and that the new class would let the company raise equity without reducing his voting power, which he had said he would not support.

Our investments are paying off, the core business is strong, and we're seeing velocity across the board.

Mark Zuckerberg, Founder and Chief Executive, Meta

Spending ahead of the returns

Revenue rose 26 per cent to 64.60 billion dollars in the quarter to 30 September. Total costs and expenses rose 68 per cent to 51.61 billion dollars, including a 9.89 billion dollar charge for Meta's August agreement with 52 state attorneys general to settle litigation over teen mental health and social media. Capital expenditure in the quarter was 34.91 billion dollars and free cash flow was negative 2.12 billion dollars.

Meta narrowed its forecast for capital expenditure this year to between 135 and 145 billion dollars, from 130 to 145 billion dollars, and said it expects to keep investing heavily in AI next year. Its headcount was 66,775 at the end of September, 15 per cent lower than a year earlier. The shares fell about 7 per cent on Thursday.

The board said the scale of investment needed to compete in AI was the first reason for creating a share class that Meta can sell to raise capital.

The share class goes ahead whatever Californians decide on 3 November. What the vote settles is whether its founder needs to sell any of it.