Bloomberg News

‘Facebook Effect’ Could Boost California Budget, Analyst Says

January 12, 2012

Jan. 11 (Bloomberg) -- A public stock offering this year by Facebook Inc., the world’s most-used social-networking site, could boost California’s budget through taxes on capital gains, the state legislative analyst said in a report today.

Facebook, based in Menlo Park, California, is considering the largest initial public offering for an Internet company on record, a person familiar with the plans said last year. At least 14 other Web-related companies, including San Francisco- based Yelp Inc., are considering offerings totaling $11 billion this year, according to data compiled by Bloomberg.

California revenue forecasters assume that at least a few companies will float offerings each year, the report from Legislative Analyst Mac Taylor’s office said. Facebook plans to raise about $10 billion in an initial share sale that would value the company at about $100 billion, the person said last year.

“It’s just the sheer size of it,” Taylor said in a question-and-answer session with reporters. “It could be huge.”

Jonathan Thaw, a Facebook spokesman, did not immediately respond to a phone call and an e-mail message requesting comment on the company’s plans.

California Governor Jerry Brown unveiled a $92.6 billion spending plan Jan. 5 that assumes voters pass temporary increases in sales and income taxes in November. Even with the higher tax rates, the most-populous state would cut $4.2 billion from social programs such as welfare-to-work and health insurance for the poor under the proposed budget for the fiscal year beginning July 1.

Additional revenue from an initial public offering by Facebook could cushion the blow somewhat, the legislative analyst said in its report.

“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 revenue related to the Facebook IPO,” the report said.

At the same time, gains or losses in the stock market could dwarf a positive “Facebook effect,” the report noted.

--Editors: Jeffrey Taylor,

To contact the reporters on this story: James Nash in Sacramento at jnash24@bloomberg.net; Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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