Meta (META.US) Establishes Non-Voting Class C Shares: Issuing $24.9 billion in bonds without diluting control

According to Woofun AI, Meta (META.US) (formerly Facebook) is solving the problem of raising huge amounts of money while maintaining the integrity of control by creating a capital structure innovation called Class C shares without voting rights. The company plans to distribute Class C shares one-to-one to each existing shareholder, in order to allow Meta to sell new shares without diluting any shareholders' voting rights.

This strategic adjustment followed the release of its third-quarter earnings report. At the time, data showed that the company's free cash flow was negative $2.12 billion, mainly due to capital expenditure of $34.91 billion far exceeding cash flow from operations. A special committee composed of independent directors recommended the establishment of such new shares on the grounds that financial data for the third quarter highlighted the need for the scale of investment;

Despite a 26% year-on-year increase in revenue to US$64.6 billion, operating cash flow of US$32.79 billion was still unable to cover capital expenses; moreover, free cash flow remained positive at US$10.63 billion for the same period last year, with a significant contrast to the current situation.

Additionally, Meta has changed its cash management strategy. After spending $26.25 billion to repurchase Class A shares in the same period in 2025, no Class A share repurchases were carried out until September, and instead raised $24.91 billion through long-term debt.

Despite holding $82.45 billion in cash and marketable securities as of September 30, the specific plan or schedule for the sale of Class C shares has not been disclosed in earnings reports or 8-K documents.

According to data compiled by Woofun AI, in order to ensure stable control, Mark Zuckerberg signed an independent 'Founder's Rights Alignment Agreement' on October 20 to strictly restrict the sale of new shares on the premise of reducing his voting rights. According to the agreement, only 20% of the Class C shares distributed to Zuckerberg and certain designated transferees can be freely sold, and the remaining 80% usually have to be traded in equal amounts by selling or converting their voting shares. As long as he continues to be the company's executive, restrictions on 2.5% of dividend stocks will be lifted every quarter. Zuckerberg also promised to reside in California or Meta's headquarters for at least eight years during his time as CEO, unless there were major unforeseen circumstances.

Meanwhile, Meta must do its best to ensure that the repurchase of Class A shares is at least as large as the repurchase of Class C shares, and these sale restrictions and repurchase rules only take effect after the issuance of new shares. The new stock class will be officially launched on January 19, 2027. The Board of Directors has yet to determine a record keeping date or dividend payment date, but payments must be completed within five business days. Once dividends are paid, Meta expects Class A shares to trade at a price equivalent to splitting each share into two shares.

This move is not Meta's first; Google (GOOGL.US) adopted a similar approach in 2014 to distribute non-voting Class C shares to existing shareholders. In intraday trading on the first day of issuance, Google Class C shares were priced at $579.38, while Class A shares with voting rights were priced at $579.74. The difference between the two was minimal. Meta investors will see similar comparative data in January, and the market will test the pricing efficiency of this dual equity structure in the current macro environment. Based on the closing price on October 21, Meta's stock rose 2.17% to $712.65 in after-hours trading, indicating the initial positive reaction of the market to the financing plan. The company also expects revenue for the fourth quarter to be between $73 billion and $76 billion, providing expected support for subsequent capital operations.

Notably, this method of separating financing and control by adding non-voting stocks provides a new financial flexibility template for large technology companies in high capital expenditure cycles.

Judging from the evolution of the industry, Meta's move marks a new institutional exit for big tech giants to balance aggressive capital spending with shareholder returns. With continued investment in AI infrastructure construction, free cash flow fluctuations have become the norm. Traditional additional issuance often involves the risk of dilution of control, and the introduction of Class C stocks has effectively avoided this pain point. This is an example of how the tech sector is once again using complex equity tools to address liquidity challenges following Google's launch in 2014. In the future, if Meta can successfully maintain the repurchase balance of Class A and Class C shares and implement strict founder lock-in terms, this model may be emulated by other technology companies facing similar capital structure difficulties, thereby reshaping the market's understanding of valuations and control premiums for growth technology stocks. Investors should pay close attention to market liquidity performance and price spread fluctuations between the two types of stocks after the launch of the IPO in January 2027 to evaluate the actual operation effect of the mechanism.