Liz Hoffman
2 min read
Liz’s view
Why does Meta need to be a player in the AI race? It isn’t Google, organizing the entire internet; or Microsoft, the operating system of corporate America; or Amazon, the backbone of digital commerce. Those companies have an existential stake in the future of websites, software, and shopping. Meta sells ads. AI could transform that business — but the same could be said of Salesforce and JPMorgan, and neither Marc Benioff nor Jamie Dimon is pouring billions of shareholders’ dollars into building frontier models. They’re customers, not manufacturers, of AI.
Mark Zuckerberg, however, controls Meta and wants to make it an AI behemoth. Those two facts explain the news, scooped yesterday by Semafor, that Meta is creating a new class of nonvoting stock. It sounds dry. It isn’t. The move lets Zuckerberg issue new shares — to fund acquisitions, recruit OpenAI and Anthropic stars with massive pay packages, or simply raise cash — without diluting his controlling stake in the company he founded 22 years ago. Another motivating factor, according to unusually detailed filings that lay out Zuckerberg’s discussions with the board, was the possibility that he’d be forced to sell stock to pay a potential California billionaire tax. (In the middle of negotiations last month, he told Meta’s board he planned to list his Palo Alto house for sale publicly, a PR nightmare waiting to happen.)
Staying at the frontier of AI is expensive, and Meta carries a lower credit rating than Alphabet, Amazon, or Microsoft, limiting its ability to keep borrowing. It has been creative about shifting data-center costs off its balance sheet, but that can only go so far. At some point, it will need to issue new shares. Now it has a way to do so that doesn’t cost Zuckerberg his grip on the wheel.
Might shareholders revolt at being handed stock that comes with no say in how the business is run? Nope. Meta shareholders absorbed the snub, and a $25 billion jury verdict in a case stemming from the 2010s Cambridge Analytica episode, by temporarily sending the stock up 2% in after-hours trading Wednesday.
Notable
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Meta had previously made an attempt at creating a similar class of nonvoting stock for Zuckerberg in 2017, but had to scrap it because of its unpopularity with investors.
