Zuckerberg secures deal to pay California tax

CEO Mark Zuckerberg and Meta’s board have agreed on a new class of stock that could allow Zuckerberg to pay California’s potential billionaire tax while retaining control of the company.Meta’s recent earnings report indicated a 26% revenue increase, reaching $64.6 billion, with significant investments focused on AI infrastructure.

Zuckerberg stated that Meta’s core business remains strong and efficient.

The plan introduces non-voting Class C shares, set to launch in January 2027, providing one new share for each existing one held by shareholders.

Legal developments

The deal follows an eight-month negotiation by independent directors in response to California’s Proposition 40, a proposed one-time 5% tax on billionaires.

Zuckerberg indicated a potential move out of California over the tax, which could have raised concerns among employees if made public.

He holds approximately 60.6% of Meta’s voting power and expressed concerns over losing control if he had to liquidate shares to pay taxes.

The agreement allows him to sell 20% of the new shares immediately for tax liabilities while maintaining his voting rights.

Zuckerberg committed to remaining a Californian resident for eight years as part of the deal.

This decision reflects Meta’s urgency to compete in AI, particularly with the ongoing developments at its Meta Superintelligence Labs.

Meta is also dealing with a $25 billion penalty mandated by a New Mexico court for misleading Facebook users regarding privacy matters.

The penalty follows jurors identifying over 43 million violations against New Mexico’s consumer protections relating to the Cambridge Analytica scandal.

New Mexico’s Attorney General warned that the judgment serves as a cautionary message to the tech industry.

Meta intends to appeal, arguing the lawsuit sets a troubling precedent for how free speech is regulated online.