American billionaire Mark Zuckerberg commits to California for 8 years in Meta deal

American billionaire Mark Zuckerberg has agreed to remain a California resident for eight years under a deal with Meta Platforms Inc. that creates a new class of non-voting shares he can sell to pay a proposed state tax on billionaires without giving up control of the company.

Meta disclosed the arrangement in a regulatory filing on Wednesday. Zuckerberg, the company's co-founder and chief executive, had considered moving his main residence out of California because of Proposition 40, a ballot measure that would impose a one-time tax of up to 5% on residents worth more than $1 billion. Californians vote on it on Nov. 3.

Under the agreement, Zuckerberg must live in California, or wherever Meta has its headquarters, for eight years, with some exceptions. In return, the company will create non-voting Class C shares that he can sell to raise cash while keeping his voting power.

Starting on Jan. 19, 2027, every Meta shareholder will receive one Class C share for each Class A or Class B share they own, which works out to a two-for-one split of the stock. The new shares carry no votes. Entities linked to Zuckerberg and his wife, Priscilla Chan, which hold a majority of the votes, approved the change, so no shareholder vote is needed.

$20 billion of cash on hand

Zuckerberg can sell 20% of the Class C shares he receives right away, equal to about 10% of his total economic stake in Meta. Another 2.5% becomes available to sell each quarter as long as he stays in a full-time leadership role, a schedule that runs over the eight years. A special committee of Meta's board estimated that the structure could give him access to about $20 billion to pay a tax bill, depending on the share price when he sells.

Without the new shares, he would have had to sell some of his Class B stock, which carries 10 votes a share. That could have cut his voting control to about 53% from about 60.6%.

Zuckerberg owns about 13% of Meta, and most of his fortune of about $240 billion is tied up in the stock. A 5% tax on that fortune would come to about $12 billion, although his actual bill would depend on how the measure is applied if it passes.

The board committee, made up of directors Robert Kimmitt, Charlie Songhurst and Tony Xu, said it was "critically important" for Zuckerberg to stay in a leadership role and run the company from its California headquarters, citing "unprecedented challenge and competition" in artificial intelligence. The new shares will not increase his ownership or his net worth, Meta said.

Funding the AI race

Meta also plans to sell Class C shares from time to time to raise money, pay employees and make acquisitions without diluting the voting power of existing shareholders. The company said in the filing that it may need to raise hundreds of billions of dollars over several years to fund its AI plans, starting as soon as this fall.

California has as many as 250 billionaires with a combined fortune of more than $2 trillion. Supporters of Proposition 40 say the wealthiest residents should pay more toward public services, while opponents warn it will drive the rich and their companies out of the state. Google co-founder Sergey Brin has spent heavily to defeat the measure, and the outcome of the vote is far from certain.

The agreement does not shield Zuckerberg from the tax. Whether he owes anything depends on how voters decide next month.