Facebook May File For IPO Next Week
The highly anticipated initial public offering by Facebook may be nigh. The Wall Street Journal reports that the Palo Alto-based social media site helmed by Mark Zuckerberg may file as early as next week. It’s unknown whether the company will go with the New York Stock Exchange or Nasdaq.
Facebook is likely to raise up to $10 billion by going public, which would make it the largest web IPO ever, according to the New York Times Dealbook blog.
The buzz is already raising the stock of other internet companies, such as Zynga, LinkedIn and Pandora, reports The Street.
The public offering could be a badly needed boon for California state coffers, as Gov. Jerry Brown continues to fight to balance the state budget through tax hikes, spending cuts and reductions in pension benefits.
Capital gains revenue depends on Wall Street markets, notes the Legislative Analyst Office’s assessment of Brown’s 2012-2013 budget proposal, and those markets are unreliable.
Brown’s budget banks on about $96 billion being raised from citizens’ capital gains income. The LAO threw water on that estimate, projecting closer to $62 billion. The LAO report singled out a successful likely Facebook IPO as a potential source of state revenue in the coming year.
In the coming months, the state’s revenue forecasts will need to be adjusted somewhat to account for the possibility of hundreds of millions of dollars of additional revenues related to the Facebook IPO. These revenues could affect the budgetary outlook beginning in 2012-13. We caution that it will be impossible to forecast IPO-related state revenues with any precision, and it is likely that little information about the state revenue gain from the Facebook IPO will be available before investors file tax returns in April 2013. (Even then, due to the confidentiality of individual taxpayer information, we are unlikely to know precisely how much state revenues increased due to Facebook’s IPO.)
In considering the size of the Facebook IPO effect in the coming months, revenue forecasters will have a difficult task. Our office’s income models are based on historical trends and, therefore, already assume that some level of IPO activity occurs for California companies each year. Moreover, in our recent forecasts, our office has deliberately built in “extra” capital gains (above those generated by our model) in 2010, 2011, and 2012 to try to account for a variety of factors, including the surprisingly strong PIT receipts in some recent months. Finally, Facebook-related capital gains likely will prove to be a relatively small percentage of California’s overall capital gains in 2012. If the stock market as a whole has an unusually strong or weak year, that fact could change forecasted capital gains up or down by much more than the positive Facebook effect.
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