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Meta Plans New Non-Voting Shares for AI Fundraising
Confirmed
In Short: Meta Platforms announced plans to create a new class of non-voting shares to fund AI acquisitions and talent recruitment.
Meta Platforms announced plans to create a new class of non-voting shares, a move aimed at raising funds for AI acquisitions and recruiting top talent while maintaining CEO Mark Zuckerberg's control.
The company's third-quarter revenue exceeded expectations, but a $9.89 billion legal charge significantly impacted its operating margin.
Meta reported a free cash flow deficit of $2.12 billion in the third quarter, compared to a positive $10.63 billion in the same period last year.
In August, Meta agreed to pay up to $18 billion over a decade and restrict teenagers' use of Facebook and Instagram to settle claims that its platforms were designed to addict children.
The company's AI agent Muse has seen rapid growth, absorbing 39% of Meta's October advertising budget, up from 23% in September.
Claroc researchers discovered over 6,800 publicly accessible links to conversations shared through Muse, some containing sensitive personal and financial information.
Meta's legal troubles continued with a New Mexico judge ordering the company to pay a $25 billion penalty for misleading users about data sharing and hate-speech policies.
Despite these challenges, Meta's shares rose more than 4% in extended trading, as the company forecast fourth-quarter revenue above Wall Street estimates.
Meta's AI investments are paying off, with the company seeing growth across its platforms, including Reels, which is competing with TikTok and YouTube Shorts.
Zuckerberg stated, 'Our investments are paying off, the core business is strong, and we're seeing velocity across the board.'
However, concerns about privacy and safety are likely to increase as AI agents become more mainstream, potentially harming Meta's reputation.
The new non-voting shares will be issued in January 2027, effectively resulting in a two-for-one split, allowing Meta to fund acquisitions and retain top talent without diluting Zuckerberg's control.
What this adds
Meta's third-quarter results showed a significant decline in free cash flow, from a positive $10.63 billion to a deficit of $2.12 billion.
Despite these issues, Meta's shares rose in after-hours trading, indicating investor confidence in the company's AI strategy.
What's confirmed
- A New Mexico judge ordered Meta to pay a $25 billion penalty on Wednesday after a jury found the company misled state residents about how it shared user data with third parties and about its enforcement of hate-speech and misinformation policies, in a case tied to British political consulting firm Cambridge Analytica.
What's still developing
- Meta said on Oct. 20 that it would suspend the sharing feature, and the tested links later became inaccessible.
- Reels is battling TikTok and YouTube Shorts for short-video share, Threads is taking on Elon Musk's X, and the company's AI work is being used to sharpen ad targeting and recommendations.
- Reuters also reported that Meta had tested human contractors handling Muse calls before rolling the feature back.
- Meta Platforms raised the bottom end of its full-year capital spending guidance on Wednesday and disclosed plans for a new class of non-voting stock, a structure that would let the company fund acquisitions and recruit top AI talent without loosening CEO Mark Zuckerberg's grip on the shareholder vote.
- The agreement removed a significant regulatory hurdle that had weighed on Meta's stock and allowed the company to avoid a potentially lengthy trial that could have exposed more internal documents about its treatment of young users.
- The early popularity of its consumer-focused AI agent Muse and the release of a competitive new series of AI models have helped Meta justify those investments to investors, even though some enterprises are restricting the agent's access over security concerns.
- The $25 billion penalty is a "stark reminder of the current legal challenges Meta faces, which will continue into next year," Emarketer senior analyst Minda Smiley said.