Mark Zuckerberg, Meta’s designated first citizen

Meta Platforms

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The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, Oct 22 (Reuters Breakingviews) - Mark Zuckerberg has never hid his obsession with Rome and emperor Augustus. A new agreement keeps Meta Platforms’ META.O first citizen in the $1.8 trillion company’s capital of Menlo Park, California for eight years. It also allows the founder, chairman and chief executive to pursue bigger dreams of conquest while retaining absolute control.
Zuckerberg has some 60% of the company's vote because of Class B shares, which have 10 votes a piece. Yet his economic stake is far less at around 14%. A proposed California tax would hit billionaires like Zuckerberg for 5% of their wealth. He told Meta’s board he might move out of the Golden State, according to the New York Times.
It’s understandable directors want the boss in California. Under his leadership, the Facebook and Instagram operator has grown from start up to one of the most valuable companies on earth. Zuckerberg’s focus may be on Meta’s big push into artificial intelligence, but having a leader around the office still delivers better results according to a study by researchers at Boston College and Arizona State University.
The company will issue one non-voting Class C share for each existing share investors have. Zuckerberg can sell up to 20% of his immediately, and the remainder in steps, without reducing his voting power. In exchange he stays put instead of relocating out of state.
It’s not obvious that Zuckerberg would actually move, let alone leave the company. His desire for retaining power reflects his care for the entity he built.
The new shares will be useful for many things. Meta can use them to buy rivals, compensate workers, or raise money to invest in data centers. The company will need this ability, as its artificial intelligence push chews up resources. On Wednesday, the company said it burned over $2 billion in cash in the third quarter.
Shareholders have revolted before. In 2017 the company abandoned an attempt to issue non-voting stock. What’s different today is the expensive race to dominate machine learning. Perhaps the opportunity is so big, and the increasing number of tech giants with non-voting stock like SpaceX SPCX.O, that equity owners will play along.
Rome’s history, though, is hardly an endorsement of letting one person hold absolute power. If things start to go wrong, Meta’s ruler can essentially ignore plebeian investors.
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CONTEXT NEWS
Meta Platforms said on October 21 that the board had approved a new class of non-voting stock. All Class A and B owners would be issued one new Class C share for each share held.
Founder, Chief Executive and Chair Mark Zuckerberg agreed to a deal wherein he can sell up to 20% of his Class C shares in exchange for a commitment to stay in California and remain head of the company for eight years. If he sells more of the shares, his voting stake will be reduced. The restriction on his remaining Class C shares will be lifted in steps over this period. Zuckerberg has a 60% voting stake and owns just over 13% of all shares.
The company also reported third quarter results on October 21. In the three months ending September 30, the company had $2.1 billion of negative free cash flow. Meta’s stock fell 6% in early trading on the morning of October 22.

(Editing by Jennifer Saba; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))