Meta will give shareholders free shares if its stock doubles

Meta shareholders are set to get free shares, likely in late January. More will follow only if the stock price climbs at an extraordinary pace. The company said in a Wednesday filing that it will pay a dividend of new Class C shares, one for each Meta share an investor owns, and promised repeat payouts if the stock keeps doubling.

What changed

Meta's board declared a first dividend on Wednesday. Holders of Class A and Class B shares will receive Class C shares on a 1:1 basis. The report says this will likely happen in late January.

Two more payouts are tied to price targets. The first needs the Class C stock to double from a baseline of $580.60 to just over $1,161. The second needs it to double again, to around $2,322. Meta itself calls these targets "extraordinary."

The fine print

• Price is measured by the 30-day volume-weighted average, an average that gives more weight to heavily traded days.
• The stock must also earn at least 10% a year on average, counted from September 10.
• Each payout would match the first: one Class C share per Meta share owned.

Why Meta is doing this

The move is tied to California's so-called billionaire tax. It is a one-off 5% wealth tax on roughly 250 billionaires who live in the state. Mark Zuckerberg ranked fifth on the Bloomberg Billionaires Index, with a $247 billion net worth at Wednesday's close.

Class C shares give him something to sell to raise cash for the tax. That lets him avoid selling his existing shares, which would erode his voting power. The board acted after Zuckerberg said he was considering leaving California because of the tax.

What it means for investors

Meta's stock has already risen more than sevenfold from its November 2022 low. That gives the company a market value near $1.8 trillion, among the 10 largest in the world. Doubling from here would be a very big leap, so the extra payouts look like long shots. The January dividend is the one to plan around.

What is not known yet

The report does not spell out how Class C shares differ from the other classes. It also does not say what the new shares will be worth to ordinary holders. The filing also cautions that steps such as listing a home for sale could raise questions among employees about how the company is managed.