Facebook IPO Promises Needed Revenue for California
Tuesday, 15 May 2012 04:25 PM
Facebook Inc’s initial public offering, in addition to minting a number of billionaires and millionaires, will offer something of a financial lifeline to cash-strapped California — generating more than $2 billion in revenue for the state. The state’s budget watchdog said on Tuesday it expects the IPO will generate $2.1 billion in revenue for California through the 2013 fiscal year. The outlook comes a day after Gov. Jerry Brown proposed a revised budget plan to address a swelling deficit for the tarnished Golden State.
Facebook, the No. 1 social network, expects to raise $12.1 billion in what would be Silicon Valley’s largest-ever initial public offering, dwarfing Google Inc’s 2004 market debut. Facebook, based in Menlo Park Calif., on Tuesday raised its target price range for the IPO to between $34 and $38 per share. With enthusiasm for the historic offering running high, investors stand to reap capital gains while the company’s 3,500-plus workers could grow wealthy through stock units and options — all of which would translate into tax revenue for the state.
If Facebook’s shares debut this week at $38 a share, rise to $45 in six months and later rise further, California’s general fund would receive $2.1 billion over the next 13 months from taxes on their sale, the state’s Legislative Analyst’s Office said in a report. About $500 million would flow to California’s coffers in the current fiscal year that ends June 30, followed by another roughly $1.6 billion in the next fiscal year, the report said.
In the following 2014 fiscal year, California’s Facebook-related revenue would be about $650 million. In its 2015 fiscal year, California could see about $150 million related to Facebook’s IPO, followed by revenue in the tens of millions of dollars in both fiscal years 2016 and 2017.
The revised budget plan unveiled by Brown on Monday projected $283 million in Facebook IPO-related revenue for California’s current fiscal year and $1.2 billion in the next fiscal year.
Revenue from the IPO will help offset some of the weakness pushing California’s projected budget gap to $15.7 billion from a January estimate of $9.2 billion, according to Brown’s new budget plan.
California relies heavily on revenue from personal income taxes, and revenue from capital gains adds to the volatility. Brown’s revised budget plan acknowledged his January budget plan had overestimated how much can be expected from capital gains income.
Both Brown’s budget plan and the report by the Legislative Analyst’s Office said Facebook’s IPO will have a notable effect on California’s economy, which is slowly emerging from a brutal slump.
Facebook’s IPO will have a “significant positive impact on California personal income in the latter half of 2012, increasing it by 1.7 percent,” Brown’s budget plan said.
The IPO “could result in about $12 billion of additional income for California residents in the latter half of 2012,” Brown’s plan added.
The report by the Legislative Analyst’s Office said “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.”
© 2012 Thomson/Reuters. All rights reserved.
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This entry was posted on May 15, 2012 by Various Writers. It was filed under 2012 Election, America's Freedoms, Class Warfare, Cloward and Piven Strategy, Corruption in Government, Deficit, Diplomacy, Education, Election 2012, Elections Politics, Employer Uncertainty, Excessive Government Spending, Government, Jobs, Learn from History, Liberals Big Spending and Taxes, Most Americans Reject Socialism, National Debt, New Media News, Political Incompetence, Politics, Progressives pushing for Marxism/Socialism, Radical Liberal Progressive Left, Rights of States, The Economy, Unemployment and was tagged with Business, CA, California revenue, economy, Facebook, fiscal year 2013, initial public offering, IPO, IPO will generate $2.1 billion revenue, Jerry Brown, Mark Zuckerberg, Menlo Park, private sector.