Facebook's stock price dives, and California could take hit
Facebook's stock has nosedived since the social media giant debuted on Wall Street earlier this month, and that's bad news for California's budget.
Gov. Jerry Brown was counting on about $1.5 billion in income taxes related to the company's IPO to help patch the state's swelling $15.7-billion deficit. But if the stock price remains low, a haul that big becomes unlikely.
The Brown administration pegged the stock at $35 per share -- lower than its $38 starting point but significantly higher than the $28.19 per share at the close of trading on Wednesday.
Jason Sisney at the nonpartisan Legislative Analyst's Office, which provides budget advice to lawmakers, said tax revenue from Facebook "could be hundreds of millions of dollars less than has been projected."
Of course, that assumes the stock price stays at its current level. And even if it does, Sisney said, there are other ways for the state to make up the difference. For example, the sale of Facebook stock would increase a California resident's tax bill.
The bigger question for the state budget, Sisney said, is how the overall stock market performs. That could sway tax revenue by billions, not millions.
H.D. Palmer, spokesman for Brown's Department of Finance, said the administration does not plan to redo its revenue forecast based on the lower Facebook share price.
He pointed out that the administration's $1.5 billion estimate did not include Brown's plan for higher taxes, which the governor hopes voters approve in November. If Brown's proposal passes, the state would reap more tax revenue from the Facebook IPO.
Asked if the administration is worried about the stock price, Palmer replied by email: "We’ve kept an eye on it –- but at the same time realizing that a) it’s only been trading for less than two weeks, and b) stock prices will fluctuate -- both down as well as up relative to an opening price."
-- Chris Megerian in Sacramento
Photo: Facebook CEO Mark Zuckerberg and COO Sheryl Sandberg ring the opening bell of the Nasdaq stock market from Facebook headquarters in Menlo Park on May 18. Credit: Zef Nikolla / Facebook handout via Associated Press