California Watches Projected Tax Revenues From Facebook IPO Sink With Stock Price

By David Cohen 

Do you remember that pot of taxation-revenue gold the state of California was expecting under the rainbow following Facebook’s initial public offering? Hold that thought.

The state’s nonpartisan Legislative Analyst’s Office based its earlier projections on a stock price for Facebook of $42 per share, which was even more optimistic than the state Department of Finance’s projection of $35 apiece, according to a report in The Sacramento Bee.

The social network’s shares have sputtered, however, trading at around $20.27 per share at the time of this post after going public at $38 each.

In May, the California Legislative Analyst’s Office predicted that if Facebook shares hit $45 apiece six months after the IPO, and kept 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 would bring in $2.1 billion in taxes over the next 13 months.

It also predicted at the time:

  • $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 Legislative Analyst’s Office said Wednesday, as reported by The Sacramento Bee:

If the company’s stock price remains depressed, hundreds of millions of income tax dollars assumed in the 2012-13 state budget plan are at risk.

And Jason Sisney, who tracks revenues for the organization, told the newspaper:

Given where the price is and that it’s been weak recently, it’s one of the risks that’s out there. I mean, I get questions from Berlin and Amsterdam about it.

Department of Finance Spokesman H.D. Palmer attempted to downplay the situation, telling the Bee:

The issue is not where the share price is now — it’s where it’s going relative to November.

Readers: Do you think the state of California counted its chickens before they were hatched?

Image courtesy of Shutterstock.