On October 19, 2026, the board of directors of Meta Platforms, Inc. (“Meta”) approved a recapitalization creating a new class of non-voting stock, setting the stage for a founder agreement and a $35 billion equity raise. Acting on the unanimous recommendation of a special committee of disinterested and independent directors, the board approved an amended and restated certificate of incorporation (the “Restated Charter”) creating a new class of non-voting Class C common stock (“Class C Shares”) and declared a one-for-one dividend of Class C Shares on all outstanding Class A common stock (“Class A Shares”) and Class B common stock (“Class B Shares”). The requisite stockholders approved the Restated Charter by written consent the following day. Also on October 20, 2026, Meta entered into a Founder Alignment Agreement (the “Agreement”) with Mark Zuckerberg that contractually “staples” most of the Class C Shares issued to Mr. Zuckerberg in the dividend to his voting stock.[1] Meta filed the Restated Charter in Delaware on October 21, 2026, with an effective date of January 19, 2027. Press reports tied the timing to California’s Proposition 40, a proposed one-time billionaire tax that failed on November 3, 2026.[2] This article summarizes the stock dividend, the new class of stock, certain founder-specific contractual terms, and considerations for issuers evaluating similar capital structures.
The Billionaire Tax Backdrop
Proposition 40 would have imposed a one-time tax equal to 5% of the net worth of California residents with net worth of $1 billion or more, subject to certain exclusions.[3] Residency would have been tested on January 1, 2026, and net worth measured as of December 31, 2026, so an individual who left California during 2026 would still be subject to the tax.[4]
For publicly traded assets, Proposition 40 presumed that the fair market value of such assets equaled their market trading value on December 31, 2026.[5] Relief for the illiquidity of assets was limited.[6]
Proposition 40 posed a particular challenge for Mr. Zuckerberg because of Meta’s dual-class stock structure. His Class B Shares carry ten votes per share and represent a majority of the combined voting power of Meta’s common stock, so any sale of those shares to pay the tax would have reduced his voting power by an enhanced amount.
Key Terms of the New Class C Stock
Meta’s board (i) approved the Restated Charter authorizing the Class C Shares and (ii) declared a dividend of Class C Shares to holders of Class A Shares and Class B Shares. Once the Restated Charter takes effect, each Class A Share will continue to carry one vote, each Class B Share will continue to carry ten votes, and Class C Shares will have no voting rights except as the Restated Charter or law requires. Economically, the three classes have identical rights.
How the Staple Works. Under the Agreement, 80% of the Class C Shares issued in the initial dividend to Mr. Zuckerberg and certain of his permitted transferees (together with Mr. Zuckerberg, the “Holder Group”) are “Stapled Class C Shares.” Starting at the end of the first full calendar quarter after the dividend is paid and at the end of each subsequent quarter, Stapled Class C Shares equal to 2.5% of the Class C Shares issued to the Holder Group in the initial dividend are released from the staple. This release is conditioned on Mr. Zuckerberg serving, at all times during the quarter, full-time on the executive team or as executive chair of the board. All remaining Stapled Class C Shares will be released after eight years, subject to this condition being met.
Until they are released, to sell Stapled Class C Shares, the applicable member of the Holder Group must, within two business days of settlement, do one of the following:
- sell a matching number of Class A Shares or Class B Shares (subject to certain adjustments);
- convert a matching number of Class B Shares into Class A Shares; or
- apply credits earned from earlier sales of Class A Shares or Class B Shares, or earlier conversions of Class B Shares into Class A Shares.
If a Holder Group member sells Stapled Class C Shares without complying, a corresponding number of Class B Shares will automatically convert into Class A Shares, subject to a five-trading-day cure period for inadvertent errors. As a result, Mr. Zuckerberg generally cannot liquidate most of his dividend Class C Shares without a corresponding reduction in his voting power.
Use in Financing. Beyond the dividend, the new class provides Meta with an additional pool of equity to issue. The Restated Charter authorizes 100 billion Class C Shares, well beyond the number needed for the dividend, leaving substantial capacity for future issuances. Because the Class C Shares carry no vote, Meta can issue them to raise capital without diluting the voting power of existing stockholders. Meta has stated that it plans to launch an at-the-market program of up to $60 billion of Class C Shares once the Class C Shares begin trading. In addition, the mandatory convertible preferred stock Meta recently issued, and the forward sale agreements Meta entered into with certain financial institutions covering Class A Shares, may, in certain circumstances, convert into or settle in Class C Shares.
Takeaways for Issuers
Meta’s recapitalization shows how a controlled company can use a bespoke capital structure and agreements that separate economics from voting control to pursue strategic business objectives and raise capital. While Meta’s structure appears to have been adopted in part in direct response to Proposition 40, its use is likely to be considered in other circumstances to address the liquidity needs of stockholders. Issuers considering similar structures should map the registration path for the new class of stock early and should consider: (1) the stockholder approvals required to authorize a new class of stock and issue equity under their governing documents and the laws of their jurisdiction of formation; (2) the impact on outstanding classes of equity and the protections granted the holders of such equity interests; (3) a well-documented independent committee process if interested parties will vote on the transaction; and (4) appropriate disclosure that clearly explains how the structure fits the company’s financing needs and is consistent with the fiduciary obligations of the board.
For more information on recapitalization strategies, board governance and securities compliance, please contact the authors of this article or your Thompson Coburn contacts.
This article may be considered attorney advertising in some jurisdictions. This article is for general information purposes only. It is not a full analysis of the matters discussed and should not be relied upon as legal advice. The sharing of these materials does not establish an attorney-client relationship with the recipient.
[1] Meta Platforms, Inc., Current Report on Form 8-K (filed Oct. 21, 2026), available at https://www.sec.gov/ix?doc=/Archives/edgar/data/0001326801/000162828026066700/meta-20261019.htm.
[2] Sareen Habeshian, “Are California voters about to impose ‘world’s first’ tax on billionaires?”, BBC (Oct. 23, 2026), available at https://www.bbc.com/news/articles/ck4g1jg4n9dno.
[3] Prop. 40 Text of Proposed Laws, § 50301(b), available at https://voterguide.sos.ca.gov/propositions/40/index.htm.
[4] Prop. 40 Text, §§ 50301(a), 50306(a), 50308(n)–(o).
[5] Prop. 40 Text, §§ 50303(c)(1), 50308(j), (o).
[6] Prop. 40 Text, §§ 50301(c), 50304(a).
