Here’s Why Facebook Reversed Course on Last Year’s Stock-Reclassification Plan

Mark Zuckerberg feels that he can retain voting control while fully funding philanthropy

Facebook's proposal to create a new class of non-voting capital stock, class-C capital stock, hit a U-turn

Hold that thought: Facebook’s board of directors announced Friday that the stock-reclassification proposed by the company last April has been withdrawn.

On the day Facebook reported its earnings for the first quarter of 2016, it also announced that its board approved a proposal to create a new class of non-voting capital stock, class-C capital stock, adding that if its proposal was approved, it would issue two class-C shares as a one-time dividend for each outstanding class-A and class-B share of common stock.

Facebook co-founder and CEO Mark Zuckerberg said at the time, “I’ll be able to keep founder control of Facebook so we can continue to build for the long term, and [wife Priscilla Chan] and I will be able to give our money to fund important work sooner. Right now, there are amazing scientists, educators and doctors around the world doing incredible work. We want to help them make a bigger difference today, not 30 or 40 years down the road.”

Zuckerberg explained the reversal in a Facebook post Friday, saying in part, “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. As a result, I’ve asked our board to withdraw the proposal to reclassify our stock—and the board has agreed.”

He continued, “I want to be clear: This doesn’t change Priscilla’s and my plans to give away 99 percent of our Facebook shares during our lives. In fact, we now plan to accelerate our work and sell more of those shares sooner. I anticipate selling 35 million to 75 million Facebook shares in the next 18 months to fund our work in education, science, and advocacy. We have a lot of work ahead at Facebook to help build community and bring the world closer together. We also have a lot of work at the Chan Zuckerberg Initiative working with amazing scientists, educators, and doctors around the world who need support today, not decades from now. This path offers a way to do all of this, and I’m looking forward to making more progress together.”

A Facebook spokesperson said in an email to Social Pro Daily, “Facebook’s board determined that withdrawing the reclassification was in the best interests of Facebook and its shareholders.”