Facebook drops no-vote stock plan, Zuck will sell share to fund philanthropy

Tech Crunch

Mark Zuckerberg has gotten so rich that he can fund his philanthropic foundation and retain voting control without Facebook having to issue a proposed non-voting class of stock that faced shareholder resistance. Today Facebook announced that it’s withdrawn its plan to issue Class C no-vote stock and has resolved the shareholder lawsuit seeking to block the corporate governance overhaul.

Instead, Zuckerberg says that because Facebook has become so valuable, he can sell a smaller allotment of his stake in the company to deliver plenty of capital to his Chan Zuckerberg Initiative foundation that aims to help erradicate disease and deliver personalized education to all children.

“Over the past year and a half, Facebook’s business has performed well and the value of our stock has grown to the point that I can fully fund our philanthropy and retain voting control of Facebook for 20 years or more” Zuckerberg writes. Facebook’s share price has increased roughly 45% from $117 to $170 since the Class C stock plan was announced, with Facebook now valued at $495 billion.

“We are gratified that Facebook and Mr. Zuckerberg have agreed not to proceed with the reclassification we were challenging” writes Lee Rudy, the partner at Kessler Topaz Meltzer & Check LLP that was representing the plaintiffs in the lawsuit seeking to block the no-vote share creation. Zuckerberg was slated to testify in the suit later this month, but now won’t have to. “This result is a full victory for Facebook’s stockholders, and achieved everything we could have hoped to obtain by winning a permanent injunction at trial.”

“I want to be clear: this doesn’t change Priscilla and my plans to give away 99% of our Facebook shares during our lives. In fact, we now plan to accelerate our work and sell more of those shares sooner” Zuckerberg wrote. “I anticipate selling 35-75 million Facebook shares in the next 18 months to fund our work in education, science, and advocacy.” That equates to $5.95 billion to $12.75 billion worth of Facebook share Zuckerberg will liquidate.

When Zuckerberg announced the plan in April 2016, he wrote that being a founder-led company where he controls enough votes to always steer Facebook’s direction rather than cowing to public shareholders lets Facebook “resist the short term pressures that often hurt companies.” By issuing the non-voting shares, “I’ll be able to keep founder control of Facebook so we can continue to build for the long term, and Priscilla and I will be able to give our money to fund important work sooner.”

With the new plan to sell shares, it’s unclear what might happen to Zuckerberg’s iron grip on Facebook’s future in “20 years or more”.

Dropping the Class C share plans may be seen as a blow to Facebook board member Andreessen Horowitz who Bloomberg revealed had coached Zuckerberg through pushing the proposed plan through the rest of the board. But given Zuckerberg’s power, Andreessen is unlikely to be ousted unless the Facebook CEO wants him gone.

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