Facebook Facing Class-Action Lawsuit Over Stock Scheme To Put Zuckerberg In Control

Menchie Mendoza, Tech Times 01 May 2016, 12:05 pm

Just recently, we reported on how Facebook proposed a new class of shares in a move to keep the company still under the control of founder and CEO Mark Zuckerberg.

However, that decision led a shareholder to file a class action lawsuit just two days after the proposal on the new stock scheme was made.

The lawsuit, which was filed in the Delaware Court of Chancery, claimed the new scheme is unfair and called for the company to halt the issuance of a new Class C stock.

Details in the lawsuit, according to Reuters, said that the Facebook board committee that approved the new share deal "did not bargain" with Zuckerberg in order "to obtain anything of meaningful value" as a result of allowing the Facebook founder to gain added control over the company.

The new stock scheme, once approved, will allow Class C shares to go on trade for the purpose of providing funding support for the company's philanthropic initiatives. It is scheduled for a discussion and shareholders' voting on June 20, which will coincide with the company's annual meeting event.

These new class of shares shall be publicly listed, albeit with no voting rights. Facebook plans to issue two "Class C" shares for every shareholder's outstanding Class A and Class B shares. The newly created Class C shares, when traded publicly, will be labeled using a new symbol.

It should be noted that Zuckerberg made an announcement in December on his intention to put 99 percent of his Facebook shares to support a new philanthropic initiative that will focus on human potential and equality.

The lawsuit states that not only will the move allow Zuckerberg to retain his power, but it will also give him the advantage to sell large amounts of his share of stocks and then rake in the proceeds, which could reach billions of dollars.

Facebook's new stock scheme is part of the company's plan to keep Zuckerberg at the helm in order to ensure future success. In a statement, Facebook said that the plan was issued under the purpose of serving the company's best interests, as well as all of its stockholders.