Meta creates non-voting Class C shares to finance AI buildout

Meta Platforms said alongside third-quarter earnings that it will create a new non-voting Class C share class and distribute one Class C share for each Class A and Class B share already outstanding, a move that functions like a two-for-one stock split while preserving founder Mark Zuckerberg's voting power. The plan received board approval on October 19, 2026, and shareholder consent in writing the following day, Tech Times reported. The new Class C securities become effective on January 19, 2027, with trading expected later that month. Chief Financial Officer Susan Li said on the earnings call that the company has not earmarked any particular financing for the new class, but sought "access to a diverse pool of funding sources" as it spends heavily on AI.

Meta's dual-class structure gives Class A shares one vote each and Class B shares ten votes each. Zuckerberg holds about 60.6% of voting power through Class B shares but only about 13.4% of the economic stake. Because Class C shares have zero voting rights, Meta can use them for employee compensation, acquisitions and fundraising without reducing his control. The company forecast 2026 capital expenditure of $135 billion to $145 billion, and the filing said relying heavily on debt could pressure credit ratings and balance sheets, making equity financing attractive. Meta had already raised $24.91 billion in bonds during the second quarter and carried $83.66 billion in long-term debt at the end of that quarter, according to Tech Times.

The third quarter showed the spending strain. Revenue rose 26% year over year to $64.60 billion, but costs and expenses jumped 68% to $51.61 billion, largely because of a $9.89 billion charge from an agreement with the attorneys general of more than 52 states and territories, who alleged Meta deliberately made its platforms addictive and knowingly exposed young people to severe mental harm. Operating income fell 37% to $12.99 billion, and reported diluted earnings per share were $3.83; excluding the legal charge, Meta said earnings per share were $7.40. Capital expenditure, including finance lease principal payments, reached $34.91 billion, while operating cash flow was $32.79 billion, leaving negative free cash flow of $2.12 billion, compared with positive free cash flow of $10.63 billion in the same quarter a year earlier. Meta's cash, cash equivalents and marketable securities fell from $90.26 billion at the end of June to $82.45 billion. The stock dropped nearly 7% and erased about $124 billion in market value after the announcement.

Under the distribution, Zuckerberg, who as of October 1, 2026 held beneficial ownership of about 341.2 million high-vote shares and 1.2 million ordinary Class A shares, would receive about 342.4 million Class C shares. Only 20% of those Class C shares can be sold immediately; the remaining 80% are stapled to voting shares, so any sale requires him to sell or convert the same amount of Class A or Class B stock. Tech Times reported that 2.5% of the stapled shares are released each qualifying quarter, with full release requiring 32 quarters, roughly eight years.

Fortune reported that the recapitalisation followed months of negotiations between Zuckerberg and a board committee; the filing shows the committee proposed sunset provisions, but Zuckerberg refused any agreement that could cost him voting control. The filing also described how California's Proposition 40, a proposed one-time 5% wealth tax on billionaires who were residents on January 1, 2026, influenced Zuckerberg's thinking. According to the filing, he told the committee he was "considering establishing residence outside of California" and later disclosed plans to put his Palo Alto house on the market; under the final deal he agreed to stay in California, or wherever the company is based, for eight years and to keep his $1 annual salary.

On October 21, a New Mexico judge ordered Meta to pay $25 billion in a case where a jury concluded the company misled users about data privacy related to Cambridge Analytica; Meta said it will appeal, and the amount is not accrued in its results.