Facebook Shareholders Secure Total Win
on Eve of Trial as Company Drops Plan to Issue
Separate Class of Non-Voting Stock
In a stunning shareholder victory on the eve of trial, Facebook announced it was dropping plans to issue a new class of stock that would have allowed CEO Mark Zuckerberg to retain a voting majority of the company’s shares. A class action trial on the matter was scheduled to begin September 26, 2017 in the Delaware Court of Chancery, with Mr. Zuckerberg slated to face questions on the stock reclassification, which shareholders asserted conferred an unfair economic advantage to the social media giant’s founder. Stockholders were also challenging the way in which the reclassification plan had been negotiated with a special committee of Facebook’s Board of Directors.
Facebook’s Board announced that it was withdrawing its plan to issue the non-voting C shares, resulting in an unconditional win for common shareholders, whose sole objective in bringing suit was to block the reclassification.
G&E Managing Director Stuart Grant, representing several institutional investors, was preparing to handle cross-examination of Mr. Zuckerberg at trial. “We’re thrilled that Facebook has dropped the reclassification,” Mr. Grant said, noting that shareholders were not seeking economic or other damages against the company. “Stopping the issuance of the non-voting C shares is all the relief we were asking for at trial. Today’s move is a total victory for stockholders.”