Facebook's dramatic IPO was a cause for celebration in California. Gov. Jerry Brown noted at the time that though Facebook was created at Harvard, the company had to move to California "to make it work." That was evidence the state had a bright future. More to the point, the governor relied on Facebook to balance his budget, counting on $1.9 billion in state tax revenues from selling of Facebook shares by employees. But that budget deal was based on Facebook maintaining a share price somewhere around $38 through November, when employees would be free to exercise stock options. Oops!
FACEBOOK'S PLUNGE
California's legislative analyst's office now says the expected revenues may not materialize unless the company's share price turns around. It's currently trading at $20 a share, far from the price that analysts predicted would yield $1.9 billion. The state was counting on taxing the proceeds of a wave of selling by employees at that price or higher at the maximum California tax rate of 10.3 percent, in addition to voter approval of a Brown backed referendum in November raising the top rate, which would have yield about $400 million of the total $1.9 projected.
The prospect of Facebook's share bouncing back anywhere near the $35-$38 range needed to spur those kinds of revenues, however, seem increasingly remote, especially as the company is battered by bad news and questions about its basic business model.
The prospect of Facebook's share bouncing back anywhere near the $35-$38 range needed to spur those kinds of revenues, however, seem increasingly remote, especially as the company is battered by bad news and questions about its basic business model.
Man, these guys could have saved a lot of money if they had been incorporated in Texas or some other low-tax state. I guess they aren't that smart after all.
Im sure they were licking their chops during real estate bubble days on the flipping. Samething just different asset. Lol.