Meta Platforms Inc. (NASDAQ:META) plans to create a new class of non-voting shares it can use to raise capital, pay employees and buy other companies as it pours money into AI. A close read of the company’s filing, however, turns up two drawbacks.
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The Facebook parent company announced the plan with its third-quarter results, declaring a one-time dividend of one Class C share for every outstanding Class A and Class B share. The new class will take effect on Jan. 19, 2027.
In its SEC filing, Meta said the Class C stock “will be available for use for capital raising, employee compensation, potential acquisitions, and other general corporate purposes.”
The structure also protects CEO Mark Zuckerberg’s grip on the company, and Meta says so directly in the filing: “The Recapitalization will also allow us to make stock-based acquisitions and to continue to grant equity awards to our employees without affecting Mr. Zuckerberg’s majority voting control.”
Zuckerberg controls about 60.6% of the vote at Meta while owning roughly 13.4% of the company. Fortune reported that he wanted to keep his control, meet his pledges to fund the Chan Zuckerberg Initiative with Meta stock and prepare for a possible California wealth tax.
Zuckerberg can sell 20% of his new Class C shares right away.
A Cheaper Currency
The first drawback is price. According to the filing, Meta expects Class C shares to trade at a discount to its voting stock.
A lower share price would force the company to issue more stock to raise the same amount or pay for the same deal, and existing shareholders would absorb more dilution.
Zuckerberg raised the issue himself during talks with the special committee, warning the dividend ratio could leave Class C shares at a significant discount to Class A stock in a later equity raise and hurt all shareholders.
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A Tax Problem for Sellers
The second drawback applies to acquisitions. According to the filing, Class C shares cannot meet the voting-stock requirements for certain tax-deferred deals.
Owners of a target company hoping to defer a tax bill may hold out for a different form of payment, which would limit the new shares’ usefulness in dealmaking.
The Bottom Line
Meta’s need for capital is easy to understand, given third-quarter capex of $34.91 billion left free cash flow at negative $2.12 billion. The company expects 2026 capex of $135 billion to $145 billion and plans to keep investing aggressively in AI next year.
The market will get its first chance to price the Class C shares once they arrive in January.
META Stock Price Activity: Meta stock was down 3.07% at $676.10 during premarket trading Thursday, according to data from Benzinga Pro.
Photo: Shutterstock
