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FB windfall to help California fill budget hole

Facebook's initial public offering will make lots of its staff in California rich -- and should therefore help the perennially cash-strapped state fill a whopping $16 bn budget hole.

social media Updated: May 19, 2012 01:13 IST
Xavier-Schmidt-of-Menlo-Park-has-his-picture-taken-by-his-parents-outside-Facebook-s-headquarters-in-Menlo-Park-California-the-night-before-the-company-s-IPO-launch-Reuters-Beck-Diefenbach
Xavier-Schmidt-of-Menlo-Park-has-his-picture-taken-by-his-parents-outside-Facebook-s-headquarters-in-Menlo-Park-California-the-night-before-the-company-s-IPO-launch-Reuters-Beck-Diefenbach

Facebook's initial public offering will make lots of its staff in California rich -- and should therefore help the perennially cash-strapped state fill a whopping $16 bn budget hole.

According to official estimates, the record-setting IPO on Friday will make a windfall of some $2.1 billion dollars for California, whose governor just this week proposed a series of spending cuts to help cut its deficit.

The extra revenues will come from taxes on various forms of income linked to the market launch of the social media giant, based in Menlo Park, south of San Francisco, said the state's Legislative Analyst's Office.

Analysts say investors should be wary of buying hyped up tech stock in their initial offering -- they are often available at a lower price later on. Some recent examples:

Groupon, the online daily deal company, priced its stock at $20 a share in its Nov. 4 IPO. The stock traded above $31 the first day. Now it's under $13.

Zynga, the developer of "FarmVille" and other Facebook games, went public at $10 a share on December 6.