Meta issues new non-voting shares to fund AI expansion

Meta is facing a significant financial challenge as it seeks to finance its aggressive expansion into artificial intelligence. To resolve this tension between heavy capital requirements and the desire to maintain its current governance structure, the company has introduced a novel financial instrument. This move allows Meta to raise substantial funds for its AI initiatives while ensuring that existing shareholders retain their current influence over corporate decisions.

The details of this strategy were confirmed during the company’s third-quarter earnings call on Wednesday. The announcement follows earlier reports suggesting the tech giant might issue shares that do not carry voting rights. By creating this specific type of equity, Meta aims to access new funding streams without altering the power dynamics established among its existing investor base.

Susan Li, the company’s chief financial officer, outlined the plan during the call. She stated that Meta intends to create a new class of non-voting capital stock. This new stock will be distributed to all current shareholders through a stock dividend. Li explained that the primary goal is to create a publicly traded non-voting stock that can be used for capital raising, employee compensation, and acquisitions. This approach preserves the voting power of the existing Class A and B shareholders, which she noted helps maintain the company’s founder-led structure.

Li emphasized that this new tool provides the flexibility needed to invest in the company’s growth. She described the momentum across the business as being driven by AI, stating that the new shares give the company expanded funding options to back this momentum. The structure is designed to support general corporate purposes while keeping the decision-making authority in the hands of those who already hold voting shares.

The financial results for the quarter were strong, exceeding expectations from Wall Street. Meta reported revenue of $64 billion, marking a 26% increase compared to the same period a year ago. However, this growth came with a significant rise in spending. Costs and expenses increased by 68% year-over-year, reflecting the heavy investment required to sustain its technological advancements and operational expansion.

Despite the overall financial strength, the Reality Labs division continues to operate at a loss. This division handles Meta’s augmented reality glasses, virtual reality headsets, and related software. The company expects the division’s losses to shrink from their 2025 levels, projecting a loss between $18 billion and $19 billion for the current period. This represents a reduction in the financial drain from this unit, though it remains a significant area of expense.

Over the past year, Meta has accelerated its release of AI products. The company launched several models earlier this year, including Muse Spark and Muse Glimmer. In recent weeks, it added Muse Wonder and Muse Spark Open, the latter of which is an open-weight model allowing outsiders to use and build upon its underlying parameters. Meta also introduced Muse Code, a coding agent designed for software developers. At its Meta Connect event, the company unveiled a new line of avatars for its AI assistant, Meta Muse, aiming to make the service more relatable and shareable.

CEO Mark Zuckerberg highlighted the rapid adoption of these new tools during the earnings call. He noted that in just a month and a half, more than 10 million people in the United States and Canada have set up Muse personal agents. Zuckerberg stated that growth remains strong, with the product holding the number one spot in the App Store on almost every day. He indicated that the company is entering a new operational phase focused on scaling the product, with an expectation to eventually serve billions of people.

While the financial and product updates were positive, Li acknowledged that regulatory and legal challenges remain. She stated that the company continues to monitor active legal and regulatory matters that could significantly impact its business and financial results. Specific scrutiny is being directed at youth-related issues in several markets, with a number of related trials scheduled in the United States in the coming months.

The introduction of non-voting stock represents a strategic shift in how Meta approaches capital allocation. By separating voting rights from economic ownership in this new class of shares, the company aims to balance the need for massive investment in AI with the preservation of its established leadership structure. This move provides a clearer path for future fundraising and compensation strategies without diluting the control held by current key stakeholders.