In brief
Keen to keep his primary home in California, Mark Zuckerberg struck a deal with Meta that doubles his shares through a new stock split. The one‑time 5% tax on billionaires could cost Zuckerberg roughly $10bn, prompting the company to create a special stock type for his benefit. Under the “Founder Alignment Agreement,” Zuckerberg will receive an additional share for each existing one and can sell them quarterly, preserving control while boosting liquidity. The move, meant to last eight years or until his residency changes, is also a nod to Meta’s AI‑driven future amid hefty spending and shifting workplace dynamics. Despite the tax debate and internal restructuring, Meta’s board views the deal as crucial for retaining leadership during an AI‑era transformation.
Meta has agreed to a new deal with chief executive Mark Zuckerberg to prevent him from leaving California over a proposed state tax on billionaires.
The agreement gives Zuckerberg, whose wealth is estimated to exceed $200bn, even more shares in Meta to make up for the fraction of his fortune he may lose if the tax wins voter approval in November.
The measure would impose a one‑time 5% tax on residents with a net worth of more than $1bn. It would likely see the Facebook co‑founder pay around $10bn in additional state taxes.
He secured the deal with a special committee of Meta after “robust” and “at several points, contentious” negotiations, according to a Wednesday financial disclosure.
California is home to most of the US’s technology giants and there are around 225 billionaires who reside in the state.
The wealth of such people, including Zuckerberg, has ballooned in recent years. Meanwhile, his estimated effective tax rate in California was less than 1% each year.
Nevertheless, Zuckerberg told Meta’s board last month that he was thinking of moving his primary residence out of California, and even selling his property in the state.
Such a move “would be public and inevitably noted and commented upon by company employees”, Zuckerberg told the board.
In response, Meta decided to create more shares of stock in the company in order to give Zuckerberg a way to essentially make up any wealth he may lose through the tax proposal.
Through a stock split announced by the company on Wednesday, Meta created an entirely new type of stock and gave one new share to each existing shareholder. Zuckerberg is one of the company’s largest shareholders and controls the company through the design of his holdings.
Under the deal, he will receive more stock, more often, and also be able to sell it on a quarterly basis.
The deal appears to be effective even if the one‑time tax in California does not pass, and will go on for eight years – as long as Zuckerberg remains a resident of California.
Meta called the deal with Zuckerberg its “Founder Alignment Agreement,” saying it was “critically important” to keep him leading the company from California given the “dramatic and unprecedented transformation taking place in the tech industry and global economy related to artificial intelligence.”
The company alluded to problems the company experienced during the Covid‑19 pandemic, when Zuckerberg began working outside of the office and mostly from his large compound in Kauai, Hawaii.
After a surge in hiring at Meta during the pandemic, a whistleblower scandal that led to renewed focus on child safety, and a refocus within the company to building out the “metaverse,” Meta has moved away from the virtual platforms and is more focused on artificial intelligence products and related tools.
With Zuckerberg leading the company's efforts to catch up in the AI race, Meta's board said it sees a future of “tremendous market opportunity” for the company.
Meta said on Wednesday it planned to spend as much as $145bn this year on AI projects. The company has increased the amount it expects to spend on AI each financial quarter so far this year, and intends to spend even more in the year ahead.
The great spending has pushed Meta to post negative cash flow for the first time since it went public 14 years ago.
Meta's shares fell more than 7%, wiping more than $100bn off of the company's market capitalisation, a key metric used worldwide to measure the value of a publicly‑traded company.
