California Expects to Get $2.5 Billion From Facebook IPO

By Abram Brown, Forbes Staff

NEW YORK ( Forbes) -- The highly anticipated Facebook IPO will mint a few new Silicon Valley millionaires and billionaires. But it will also help fill the depleted California governmental coffers.

California is hoping to get a $2.5 billion revenue windfall as Facebook employees and investors pay capital gains tax on stock options, according to a report from California's Legislative Analyst's Office.

The Facebook IPO "could generate extraordinary, one-time changes in high-income taxpayer data in 2012 and 2013," according the report. Tax revenue will flow in over a period of several years. California expects about $500 million in this fiscal year and $1.5 billion the next. Smaller amounts will trickle in after that.

Facebook filed initial documents with the Securities and Exchange Commission Feb. 1 to go public sometime later this year. Right now, Facebook is posed to complete a $5 billion offering, but other reports have put that number considerably high, closer to $10 billion. Regardless, the debut will be the largest from a U.S. Internet company since Google's $1.7 billion 2004 deal.

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Talk of Facebook's impending IPO initially buoyed social media stock like LinkedIn, Groupon, and Pandora. Zynga shares saw an especially impressive rally after Facebook revealed it derives 12% of its revenue from the social-games maker.

California could also use a boost. Gov. Jerry Brown (D) faces a $9 billion hole in the current budget.

No one knows exactly when Facebook stock will begin trading. It's likely to take at least three to four months. During that time, Facebook will file more reports with the SEC.

California is eagerly awaiting those SEC documents. It wants to see more information on the stock offered to Facebook employees and investors and when the lock-up period will end, according to the government report. The exact amount California receives will depend on the share price when Facebook insiders start to sell stock.

The report cautioned against lofty spending plans for all that cash, advising a more prudent approach. "Yet, given that an IPO would clearly benefit state revenues, we believe it is appropriate for policymakers to incorporate this into their budgetary discussions."

--Written by Abram Brown at Forbes
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