Golden State: California Eyes $2.1B In Revenue From Facebook IPO

By David Cohen 

The California Legislative Analyst’s Office, the state’s budget watchdog, expects Friday’s Facebook initial public offering to generate $2.1 billion in revenue for the state through the 2013 fiscal year.

Reuters reported that the California Legislative Analyst’s Office predicted that if Facebook shares debut Friday at $38 per share, and then hit $45 apiece in six months, and keep rising, the combination of capital-gains taxes from investors and taxes on stock awards and options for employees of the Menlo Park-based social network will bring in $2.1 billion in taxes over the next 13 months.

The report from the California Legislative Analyst’s Office went on to say, as reported by Reuters:

Around 20 percent of the state’s personal income growth in 2012 — and nearly 1 percent of all personal income in the state this year — is expected to be related to Facebook.

Going forward, the budget watchdog predicted, as reported by Reuters:

  • $650 million in Facebook-related revenue for California in the 2014 fiscal year.
  • $150 million related to the IPO in fiscal-year 2015.
  • Tens of millions of dollars in the next two fiscal years.

The forecasts from the budget watchdog were up slightly from its initial projections after Facebook filed for its IPO in February:

Given all of these uncertainties, there is a very large range of error around our initial Facebook personal income tax estimates. Specifically, we are assuming in our forecast receipt of $500 million of personal income tax revenue in 2011 to 2012 (assuming an IPO prior to the end of the current fiscal year results in significant PIT withholding or estimated payments in 2011 to 2012), $1.5 billion in 2012 to 2013, and much smaller amounts thereafter through 2015 to 2016. Should the IPO proceed, it appears virtually certain that the state revenue impact will be at least in the hundreds of millions of dollars, spread across a few fiscal years.

On the other hand, if the IPO results in a market capitalization of well over $100 billion and/or Facebook’s stock price climbs significantly above its IPO level (particularly in the first six to 12 months after the IPO), the state revenue benefit could be $1 billion or more over the level we assume, spread across a few fiscal years.

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