I don’t know if you have heard of this website called Facebook. It is really quite simple in that people mingle to share photos, updates on their lives, play games, and oh, by the way, there are a few advertisements.
Those ads are the key to allow Facebook to go public and to be offered at such a high offering.
When Facebook went public last week there were a couple of big winners in the offering and they were the United States Treasury and the State of California who are expected to reap nearly $4.6 billion. Uncle Sam will pocket $3.5 billion.
Here is an interesting twist to the IPO from Fiscal Times:
“And where will Facebook, which only had $3.9 billion in cash and marketable securities on hand at the time of the IPO, get the $4.6 billion necessary to pay those taxes? The prospectus stated it plainly: ‘We anticipate that we will expend substantial funds (from the stock offering) in connection with tax withholding and remittance obligations related to the initial settlement of our restricted stock units.’ (The stock tied to the 2005 executive compensation plan).
“In other words, Facebook raised $6.8 billion from the 180 million shares it sold to the genral public in the IPO , and will spend more than two-thirds of that cash, much of it from the retirement savings of middle class Americans, on its wealthiest employees’ tax withholding. “That level (raised for taxes) is unusual,” said Michael Maryn, a partner at SNR Denton and an expert on executive compensation. “The real purpose of this IPO was to allow Zuckerberg and early shareholders to cash in on the value of Facebook. They’re cashing in their chips, so to speak.”
So, my question to you, did you buy Facebook stock? Do you care, as a shareholder of Facebook, that Zuckerberg might be cashing it in?
If you happen to be an executive at Facebook and need some help with your tax planning, we would be happy to help you. Just drop on by or give me a call!