Why Zuckerberg Won’t Be Fired…What is Dual Class Stock?

Last Updated on 11/10/2022 by てんしょく飯

Despite the growing backlash against his pivot to the Metaverse, Mark Zuckerberg will not be fired.

He has built Meta to give him complete control over every decision affecting the company.

Meta is not the only company that gives insiders excessive decision-making power. Google and Snap have similar mechanisms.

Mark Zuckerberg will never leave Meta.

Despite the growing backlash against Meta’s billions of dollars bet on the Metaverse, Mark Zuckerberg has built the company in a way that does not force him out of the CEO role unless he wants to be, making him one of the most He is one of the most powerful CEOs in corporate America.

What is Dual Class Stock?

Meta, which was renamed from Facebook, is structured as a dual class stock. That is, the public shareholders own a class of stock called Class A, while Zuckerberg and a few insiders own a class of stock called Class B.

Class B shareholders have 10 votes per share, and Class A shareholders have only one vote for the same, which means that Zuckerberg and other Class B shareholders are essentially invincible. Moreover, Zuckerberg alone owns 90% of the company’s Class B shares. That is enough for him alone to maintain absolute control.

Investors are left with few options.

In general, shareholders have an equal say in matters affecting the company. In other words, no matter who owns the company, they only have one vote per share.

But that is not the case at Zuckerberg’s company.

According to a 2018 CFA Society report, proponents of this dual-share structure argue that “such control is desirable for charismatic and visionary founders and entrepreneurs to execute their vision without undue concern for stock market performance.”

Jay Ritter, a finance professor at the University of Florida, notes that this logic applies to meta investors as well.

He says, “Up until this year, Facebook’s stock had been doing very well. That was one of the reasons investors bought even shares with inferior voting rights.”

After 2022, that mindset has changed. Many investors are growing frustrated with Zuckerberg’s plan to spend even more money to build the metaverse and possibly lose it. But they are not left with many options.

Selling the stock is the only option,” Ritter says.

And investors are choosing that option: since the beginning of 2022, Meta’s stock price has fallen more than 70%.

It’s not just Meta.

But Meta is not the only high-tech company that gives its insiders significant voting power.

According to Ritter, “In recent years, the initial public offerings of many high-tech companies have been dual-stock structures. For example, both Google (Google) and Snap (Snap) have similar structures.

Ritter believes that Zuckerberg really believes that putting Metaverse at the center is what’s best for Meta’s shareholders.

“If he owns a lot of stock, he probably thinks he’s doing the right strategy,” Ritter says.

Most of Zuckerberg’s assets are related to Meta. According to the Bloomberg Billionaire Index, his net worth has declined by $81 billion since the beginning of this year.