AI bet escalates further! Meta (META.US) plans to issue Class C shares to raise funds; Zuckerberg's "control" remains unchanged.

Title context: AI bet escalates further! Meta (META.US) plans to issue Class C shares to raise funds; Zuckerberg's "control" remains unchanged. Text: Meta (META.US) has established a new class of non-voting stock to raise funds for its massive spending in the artificial intelligence (AI) sector. The company announced that its board of directors has approved the creation of non-voting Class C common stock intended for public listing, planned to take effect in January 2027. The company plans to implement a one-time stock dividend to existing holders of Class A and Class B common stock at a ratio of one Class C common share per share held. It is expected that after the distribution is completed, the market price of Class A common stock will reflect a stock split effect similar to a two-for-one split, but the voting rights of existing shareholders will not change as a result. It is reported that the Meta board's approval was based on the unanimous recommendation of a special committee composed of independent directors without conflicts of interest. The special committee was established by the board to evaluate the company's capital structure. The special committee and the board unanimously believe that, for the following reasons, establishing this new class of stock is prudent, fair, and in the best interests of Meta and its shareholders: 1. Establishing a new class of shares to raise funds, for employee compensation, potential acquisitions, and other general corporate purposes Against the backdrop of AI transformation sweeping the industry, the scale of investment required to remain competitive, sustain growth, expand infrastructure, and pursue new strategic initiatives is enormous. The special committee determined that establishing this new class of common stock will enable Meta to fund its growth and help the company maintain a leading position amid intense competition at home and abroad. 2. Continuing to create maximum long-term value for all shareholders Since Meta's founding, its management team has consistently prioritized long-term goals and value creation, and the company's stock price has risen more than 1,700% since its IPO. By comparison, the S&P 500 Index rose only about 495% over the same period. The special committee hopes Meta will continue to innovate and focus on long-term growth, and the issuance of Class C stock is intended to promote this goal. 3. Ensuring founder and CEO Mark Zuckerberg continues to lead Meta into a new era The special committee unanimously believes that Zuckerberg is best suited to lead Meta into a new era and the future. They recognize that the significant value Meta has created for shareholders is largely attributable to his outstanding leadership, unique and creative vision, and exceptional management capabilities. The issuance of Class C common stock will continue the founder-led model the company has upheld since its founding, and it is precisely this model that has driven the company's success. Meta's third-quarter financial report released after the U.S. market close on Wednesday showed revenue rose 26% year-over-year to $64.601 billion, better than the market expectation of $63.33 billion; net income was $9.860 billion, up 264% year-over-year; diluted earnings per share were $3.83, up 265% year-over-year, slightly better than the market expectation of $3.85. It is worth noting that the sharp increase in net income was mainly due to the low base formed by high income tax expenses in the same period last year. Meta's third-quarter income tax expense was $3.141 billion, far below $18.954 billion in the same period last year, and the effective tax rate fell from 87% to 24%. Operating income fell 37% year-over-year to $12.988 billion, and the operating margin dropped from 40% in the same period last year to 20%. Meta said total costs and expenses in the third quarter surged 68% year-over-year to $51.613 billion, including $9.89 billion in expenses recognized due to a settlement with 52 U.S. state attorneys general over litigation related to teen mental health and social media. Excluding this expense, the company's operating income for the quarter would have reached $22.877 billion, and diluted earnings per share would have risen to $7.40. By business segment, Meta's Family of Apps third-quarter revenue was $64.158 billion, of which advertising revenue was $63.061 billion, up about 26% year-over-year. Ad impressions in the quarter rose 10% year-over-year, and the average price per ad rose 14%. Reality Labs revenue was $443 million, down from $470 million in the same period last year, with an operating loss of $4.129 billion. In terms of user data, the average daily active users of Meta's Family of Apps reached 3.64 billion in September, up 3% year-over-year. In terms of cash flow, Meta's third-quarter operating cash flow was $32.786 billion, capital expenditures (including principal payments on finance leases) were $34.906 billion, and free cash flow was negative $2.120 billion. As of the end of September, the company held $82.449 billion in cash, cash equivalents, and marketable securities. Looking ahead to the fourth quarter, Meta expects revenue to be between $73 billion and $76 billion. The company raised its full-year 2026 total expense forecast to $175 billion to $179 billion to account for the litigation expenses recognized in the third quarter; at the same time, it narrowed its full-year capital expenditure forecast range from the previous $130 billion to $145 billion to $135 billion to $145 billion. Meta expects Reality Labs' full-year loss this year to be between $18 billion and $19 billion, and is expected to narrow to about $15 billion in 2027. The company said it will continue to actively invest in AI infrastructure and new products, and expects advertising business improvements and new product opportunities brought by AI investments to support strong overall revenue growth in 2027.