Mark Zuckerberg owns 13% of Meta but controls 61% of its votes. California’s wealth tax would bill him on the 13%

California's upcoming November election will determine whether billionaires must pay a one-time 5% wealth tax on their net worth. Some high-profile figures like Peter Thiel and Google's founders Larry Page and Sergey Brin have already left California, taking $540 billion, or 30% of the state's billionaire wealth with them. However, others, including Meta CEO Mark Zuckerberg, Jensen Huang, and Jensen's company Nvidia, have chosen to remain in the state.

Zuckerberg's situation in California is unique due to Meta's Class B shares, which grant 10 votes per share, compared to the one vote per share for ordinary Class A shares. This arrangement means that of every $100 of Meta's value, Zuckerberg owns about $13, but of every 100 votes, he controls 61. This imbalance gives him the power to elect the entire board and influence most shareholder votes.

The proposed wealth tax would tax this ownership, forcing Zuckerberg to sell stock and potentially lose his majority voting control. Meta's board raised concerns about this loss of control, stating it could become "significant" if enacted, requiring him to sell shares or borrow against them. Zuckerberg, however, argued that ownership and control need not align, citing other companies where founders retain voting power despite owning smaller economic stakes.

In a recent SEC filing, Meta proposed compensating Zuckerberg by offering every shareholder a non-voting Class C share for each share they hold. This would allow Zuckerberg to sell 20% of his new shares, representing 10% of his overall economic stake, to pay any potential California tax without affecting his voting control. Zuckerberg agreed to remain in California for eight years, despite the tax, due to Meta's desire for his close coordination and proximity to its operations.

Meta's new Class C shares are primarily aimed at financing growth, particularly in AI, and maintaining a founder-led structure. Chief Financial Officer Susan Li explained that this share class will provide Meta with additional financial tools and flexibility for future investments. While the new stock class won't affect Zuckerberg's voting power, it does extend his voting control over Meta.