A Facebook investor has slapped the social network with a lawsuit in an attempt to halt a proposal to issue a new class of shares.
Reuters reports that the proposed class-action lawsuit, filed in the Delaware Court of Chancery on April 29, says Facebook’s plan to amend its stock structure is unfair to shareholders and serves only to benefit CEO Mark Zuckerberg.
When Facebook reported its first-quarter earnings on April 27, the company revealed that its board of directors had approved a proposal to issue new class C shares, which would have no voting rights. Shareholders will vote on the proposal at Facebook’s annual shareholder meeting on June 20.
According to the suit, the board “did not bargain hard” with Zuckerberg ”to obtain anything of meaningful value.”
If approved, the change would allow Zuckerberg to retain control of the company’s voting power, even as he plans to donate 99% of his shares to a philanthropic foundation he and his wife, Priscilla Chan, created. In a call with investors, Zuckerberg said the new stock structure would alleviate Facebook from external pressures and allow it to focus on its long-term plans, which include investments in artificial intelligence and virtual reality.
A Facebook spokesman said the “proposal is in the best interests of the company and all stockholders.”