Mark Zuckerberg is still in Control of Facebook’s New Class Structure

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Mark Zuckerberg controls Facebook right now and on Wednesday, the company made it official that this will not be changing.

The company announced that it will create a new “Class C” stock alongside its first-quarter results that has the same economic rights as the current Class A and B shares but has no voting rights.

Facebook currently has a dual-class structure. Class A shares, which are what trade under the ticker “FB” on public markets and have one vote per share, and Class B shares, which have 10 votes per share and is what company insiders own. The Class B shares don’t trade on an exchange.

The new Class C stock will gives the investors the ability to own Facebook but have no say on company decisions. It will also serve as a new ticker for the Class C stock, like “FBC” or something.This will give the Zuckerberg the power at present and in future. This move merely formalizes it.

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Here’s how Facebook describes the move (emphasis added):

For each outstanding Class A and Class B share held by our stockholders, Facebook intends to issue two new Class C shares as a one-time stock dividend. The Class C shares will have the same economic rights as the existing Class A and Class B shares but the primary difference is that the Class C shares are non-voting.

This proposal will be subject to stockholder approval at the annual meeting of stockholders on June 20 (note: Zuckerberg has enough shares that all he needs to do is vote in favor of this action and it’s done), and the actual record date for the payment of the Class C stock dividend will be set by the board at a later date. As part of this proposal, the preservation of this new multi-class capital structure would be based on Mark’s maintaining an active leadership role at Facebook.

This is a new governance model, Facebook was not built to be a traditional company. The board believes that a founder-led approach has been and continues to be in the best interests of Facebook, its stockholders, and the community.

Zuckerberg has pledged to give away 99% of his Facebook shares as part of the chan Zuckerberg Initiative.Presumably, then, those will be Class C shares which, again, confer a holder all of the economic benefits — earnings, potential dividends, etc. — without the voting rights. Those stay with the Class A and B issues.

 

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