Facebook's falling stock price is eating into California's projected revenues, according to the California Legislative Analyst's Office, with expected income taxes from Facebook employees and others who will profit from the record-breaking initial public offering falling by "hundreds of millions" of dollars.
"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," a Wednesday afternoon report from the office of Legislative Analyst Mac Taylor said.
Revenue generated from the Facebook IPO was expected to account for slightly more than 1 percent of general fund revenues in the 2012-13 budget year, but the governor and legislative analyst had to project total revenues based on assumed stock prices in May.
The governor, setting his projections before Facebook had established a final IPO price, assumed shares would sell at $35 in the IPO price and remain at that price in November, when Facebook's "lockup" period ends, allowing employees of the world's most popular social network to sell shares. The Legislative Analyst's Office was more optimistic, using the correct $38 IPO price,
but assuming that Facebook's stock price would grow to $45 by November.
The end result was a projection of roughly $1.2 billion to $1.4 billion in 2012-13 state revenue by Gov. Jerry Brown, and $1.4 billion to $1.6 billion by the LAO, with the wide ranges created by the uncertainty of Brown's tax-increase proposition slated for the November ballot.
However, Facebook's stock has failed to follow the plans state officials set for it. Following an IPO that gave Facebook a record $104 billion valuation, the stock has only closed higher than its $38 IPO price on the first day of public trading. The Menlo Park company's shares have suffered an incredibly steep drop in the past week, after Facebook's first quarterly earnings report as a public company.
Facebook stock has closed at record lows four sessions in a row, and ended Wednesday at $20.88, 45 percent lower than the IPO price.
Brown signed a $91 billion state budget on June 27 that closed a $15.7 billion budget gap, but that assumed passage of increases on individuals making more than $250,000 and a quarter-cent hike in the statewide sales tax; if the tax increases do not pass in November, a "trigger" provision would cut $5.9 billion, mostly from California schools. Assuming the taxes pass, the governor and legislative analyst predicted in May, revenues of between $95 billion and $96 billion for the 2012-13 budget year.
The Legislative Analyst's Office expects to update its projected state revenue completely in November, and pointed out Wednesday that by that time, "the company's stock price could be affected by various factors, including the company's third-quarter financial results."
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