A Facebook shareholder filed a proposed class action Friday in a bid to stop the company’s plan to issue new Class C stock, calling the move an unfair deal to entrench CEO Mark Zuckerberg as controlling shareholder.
Filed in the Delaware Court of Chancery, the lawsuit came two days after the social networking firm announced its plan to issue the shares. The rejiggering of Facebook’s share structure, effectively a 3-for-1 stock split, follows the 31 year-old CEO’s announcement last December that he intends to put 99 percent of his Facebook shares into a new philanthropy project focusing on human potential and equality.
The lawsuit contends the Facebook board committee that approved the share deal “did not bargain hard” with Zuckerberg “to obtain anything of meaningful value” in exchange for granting Zuckerberg added control.
Facebook representatives could not immediately be reached for comment.
Facebook plans to create a new class of shares that are publicly listed but do not have voting rights. Facebook would issue two of the so-called Class C shares for each outstanding Class A and Class B share held by shareholders. Those new Class C shares would be publicly traded under a new symbol.
Zuckerberg “wishes to retain this power, while selling off large amounts of his stockholdings, and reaping billions of dollars in proceeds,” the lawsuit said. “The issuance of the Class C stock will, in effect, have the same effect as a grant to Zuckerberg of billions of dollars in equity, for which he will pay nothing,” it said.
The company now called Alphabet and then called Google settled a lawsuit in 2013 shortly before trial that cleared the way for it to execute a similar plan.