Meta investors sue Zuckerberg over new share class tied to California billionaire tax

A group of Meta stockholders sued CEO Mark Zuckerberg on Tuesday. They accuse him of using a new class of non-voting stock to keep control of the company. The suit was filed in Delaware's Court of Chancery, which hears corporate disputes ¹.

The case ties the midterm fight over taxing the very rich to one of the country's most powerful tech executives. California's Proposition 40 would impose a one-time 5% tax on the net worth of state residents worth more than $1 billion. Voters decide it Nov. 3 ¹².

On tapeBloomberg Television · Oct 23

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What the plan does

Meta would give holders one new "Class C" share for each Class A and Class B share they own. The new shares carry the same economic rights but no votes. The plaintiffs say this lets Zuckerberg sell up to hundreds of billions of dollars of stock over time and still control Meta for his lifetime ¹.

Under the deal, Zuckerberg can immediately sell 20% of the Class C shares he receives, which the suit values at about $23.8 billion. The rest unlock quarterly over eight years ¹. Meta's filing, as described by Scripps News, says he can use the early sales to pay any Prop 40 bill without losing voting control ².

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The plan takes effect Jan. 19, 2027. The plaintiffs want a judge to block it before more than 2.5 billion Class C shares are issued and start trading ¹.

What the investors allege

The plaintiffs include two Steamfitters Local 449 funds and two individual investors. They say Zuckerberg told a special committee of directors the change was needed because of Prop 40 and warned that paying the tax could cut his voting power to about 53% ¹.

On tapeKTLA 5 · Oct 22

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Throughout the process, Zuckerberg claimed that the reclassification was necessary due to California Proposition 40, an initiative on the November 3, 2026 California General Election ballot that would impose a one-time 5% wealth tax on billionaires

The suit also says Zuckerberg threatened to leave California. It calls that threat empty, because the tax applies to people who lived in the state on Jan. 1, 2026. It adds that he could pay over five years and borrow against his shares ¹. These are the plaintiffs' allegations; no court has ruled on them.

According to the suit, the committee gave in without concessions. It also says no vote of Class A holders was required, and that Zuckerberg quashed 13 earlier proposals for one vote per share, each approved by unaffiliated stockholders ¹. Scripps reports that Zuckerberg-linked entities holding about 56.1% of voting power approved the change by written consent, with no shareholder vote. It also reports that he committed to stay a California resident for eight years ².

The resulting bargain is unfair

What happens next

A judge must decide whether to block the plan before January. Meanwhile, a Citrin-Politico poll cited by Scripps shows Prop 40 at 46% in favor and 43% opposed among likely voters. Opponents, largely tech executives, have raised more than $340 million ².

That matters because the fight is no longer only about a tax rate. It is also about whether the very wealthy can rearrange how they hold wealth and power in response to one.

The Record

1. Oct 27, 2026Stockholders file a class action in Delaware's Court of Chancery challenging Meta's Class C share plan ¹.
2. Nov 3, 2026California voters decide Proposition 40, a one-time 5% tax on billionaires' net worth ¹².
3. Jan 19, 2027Date the reclassification is set to take effect unless a judge blocks it ¹.

Sources

1. Courthouse News, “Investors sue Mark Zuckerberg over stock scheme to avoid California billionaire tax” (2026-10-28). courthousenews.com/investors-sue-mark-zuckerberg-over-stock-
2. Scripps News, “Zuckerberg strikes deal with Meta's board to stay in California as billionaire tax vote looms” (2026-10-28). scrippsnews.com/business/company-news/zuckerberg-strikes-dea

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