Meta introduces non-voting class C shares

Meta announced a capital reform on October 21, 2026, which will introduce non-voting class C shares to be distributed to all shareholders. These shares, which will take effect on January 19, 2027, are intended to be used for raising capital, compensating employees, and funding potential acquisitions related to the "transformation of AI."

Investment forecast revised

The company narrowed its 2026 investment forecast to a range of 135 to 145 billion dollars, down from 130 to 145 billion previously. In the third quarter of 2026, Meta's investment expenses reached 34.91 billion dollars, resulting in an operating cash flow of 32.79 billion dollars and a negative available cash flow of 2.12 billion dollars, compared to a surplus of 10.6 billion dollars one year earlier.

Board approves reform

The board of directors approved the reform on October 19, on the unanimous recommendation of a special committee of independent directors. Each holder of a class A share (one vote) or class B share (ten votes) will receive a class C share free of charge once the new corporate charter is in effect. The distribution does not change anyone's voting power but changes the way Meta can issue capital.

Capital increases and employee compensation

A capital increase, an acquisition paid in shares, or shares granted to employees can be done through class C shares, without creating a single additional vote. The modification of the stock incentive plan, adopted at the same time, also adds class C shares to the shares attributable. As of October 22, the SEC's EDGAR database contains only the preliminary version of the information statement (PRE 14C), and the registration and payment dates for the stock dividend remain to be set by the board.

Rationale for the reform

The information statement reports that the three long-term forecast scenarios presented to the board in May all showed the necessity of raising "hundreds of billions of dollars" over several years, starting as early as autumn 2026. The company says it expects to use class C shares for issuances "from time to time," according to market conditions, and the management wanted to have them available by the end of 2026.

Strategic considerations

The special committee notes that Meta currently has sufficient resources to meet its current needs. It nevertheless considers it prudent to finance itself before others capture the available money, citing recent or anticipated raises by Alphabet, SpaceX, Anthropic, and OpenAI. The level of debt envisioned by management could weigh on the credit rating. The lack of voting rights should also allow Meta to solicit sovereign financial institutions, given U.S. regulations on foreign investments.

Zuckerberg's stance on control

The committee, created in February 2026, initially proposed sunset clauses that would have converted class B shares (ten votes) into class A shares under certain circumstances. Mark Zuckerberg made it known that he would not support any solution that could cause him to lose control or impose such clauses, nor a capital increase in class A shares that would dilute his votes.

Shareholding structure

As of October 1, 2026, he held 99.8 percent of class B shares, or about 60.6 percent of the votes for 13.4 percent of the economic interests, according to the document. The two-class structure in place since the IPO allows him to decide the outcome of nearly all issues submitted to shareholders, from the election of directors to mergers. Shareholders did not vote in a meeting. The revised charter was approved on October 20 by written consent of entities owned by Mark Zuckerberg, which represented about 56.1 percent of the votes at that date.

Restrictions on share sales

Mark Zuckerberg signed a "alignment agreement" on October 20. He can freely sell 20 percent of the class C shares he receives, or 10 percent of his total economic stake. For the remaining 80 percent, each class C share sold must be accompanied by the sale of a class A or B share, or the conversion of a class B share into a class A share, which reduces his votes.

California tax and residency

These restrictions are lifted in increments of 2.5 percent per quarter spent full-time in the executive team or as chairman of the board, and are fully lifted after 32 quarters of this type, consecutive or not. The Proposition 40, an exceptional wealth tax submitted to California voters on November 3, 2026, weighs on the entire matter. In July, Mark Zuckerberg indicated to the committee chairman that paying it by selling class B shares could bring his votes down to about 53 percent.

Residency requirement

The agreement finally requires him, for eight years and as long as he remains in charge, to reside in California or in the state where Meta is headquartered, unless there are unforeseen important circumstances. The freely transferable portion should allow him to pay this tax, if adopted, without reducing his votes. The executive has also withdrawn his request for a performance-based compensation program.

New compensation structure

It is replaced by additional class C share dividends, paid to all shareholders at a rate of one share for one, each time the 30-day average price of class C shares doubles again (twice, four times, eight times, and so on, with the reference of 580.60 dollars per class A share as of September 10, 2026, adjusted for the initial dividend), with an annualized yield of at least 10 percent.

Shares received by Zuckerberg

The shares received on this occasion by Mark Zuckerberg are exempt from sale restrictions if he continues to lead the company. Meta does not invent the formula. In January 2014, the Google board approved a non-voting class C share distribution to its class A and B shareholders, paid on April 2, 2014, according to the accounts filed by Alphabet.

Risks and market expectations

The authorization of this distribution was contested in court. Under the agreement that settled the dispute, Google paid a compensatory payment of 522 million dollars to class C shareholders in 2015, calculated based on the price difference with class A shares during the first year of trading, and settled mainly in class C shares. Meta is relying on liquidity to limit this risk.

Market implications

Distributing a class C share for each existing share should create a "deep and liquid" market. The document nevertheless admits that, even so, the class C share "will likely trade at a certain discount" compared to class A shares, which would require issuing more shares to raise the same amount and dilute all shareholders. The preliminary statement does not describe a comparable compensatory payment to that of Google.

Legal protections for shareholders

The charter guarantees class C shares the same economic rights as classes A and B (dividends, merger, liquidation), and Meta commits, in the case of a repurchase of class A shares, to endeavor to repurchase at least as many class C shares. A fixed voting base for future issuances. For a minority shareholder, the distribution is neutral on the dividend date.

Long-term effects

The effect will be seen in subsequent issuances. Each issuance in class C shares will increase the capital without expanding the voting base, so that Mark Zuckerberg's economic share may decrease without his control following. Employees, on the other hand, could receive part of their compensation in a class of shares that Meta itself expects to see discounted.

Implementation timeline

The charter will take effect on January 19, 2027. The dividend will be paid no later than five business days after.