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Facebook windfall fading fast

Facebook’s shares hit a new low Thursday, falling below $20, a decline of almost 50 percent from the initial public offering price of $38.

That’s obviously bad news for investors and Facebook insiders. But state legislators and Gov. Jerry Brown may be singing the blues, too. Nothing drives state revenue quite like capital gains, and budget analysts at one point predicted a $2.1 billion bump from sales of Facebook shares. That was based on a price of $45. With the price headed in the other direction, the legislative analyst says capital gains revenue for 2012-13 could be hundreds of millions of dollars less than anticipated. Easy come, easy go.

– Jim Sweeney





12 Responses to “Facebook windfall fading fast”

  1. BigDogatPlay says:

    @VinylRules

    I’m quite familiar with the LAO. But what, pray tell, is a purportedly non-partisan office that is supposed to analyze and report on the effects of legislation doing trying to pick and fluff IPO’s?

    The first rule of investing is that past performance is no guarantee of future performance. However, given that Facebook was already having issues leading into the IPO and that Facebook’s revenue forecasting was in the too good to be true zone weighed against their obvious business model, which perhaps a half hour of due diligence such as I did would have revealed, why again should I have trusted the LAO’s opinion?

    Especially when it’s not like it’s the LAO’s core competency.

    From my vantage point as an individual investor, all the veiled recommendations coming out of Sacramento were more designed to help pump up the stock price… and by derivation add to the state’s hoped for windfall. That would be government’s job…. how?

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  2. Reality Check says:

    It is not liberal bias to think businesses sometimes hype their products. It’s reality. Nor is entirely FB’s fault that the market went gaga over the stock. Financial manias aren’t uncommon. Zynga and FB is are two recent examples.

    Speculating in hi-tech IPOs is gambling.

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  3. Judy D says:

    It is very easy for the armchair Facebook critics at the Press Democrat to set back and smack their lips over the stock issues at Facebook. But it is another issue if you spent six years working for a company, buying their stock and hoping all goes well and it goes south.

    The liberal bias against capitalism at this paper and in Sonoma County is palpable. Not everyone who works for a capitalistic company is rich or does not have to worry about paying bills, and earning a living.

    Not everyone can have a gentle job working in a newspaper office or in a county office.

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  4. Vinyl Rules says:

    @Bigdogatplay

    I guess you’re not very familiar with the California Legislative Analyst’s Office. It’s actually quite conservative in its projections and analyses. It consistently throws cold water on the Legislature’s revenue estimates, and is usually right. And its not like the LAO was the only entity out there predicting Facebook’s value would rise. Needless to say, estimating revenues based on capital gains is an inexact science at best, and mere guesswork at worst.

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  5. Snarky says:

    Vinyl Rules:

    We’d have much more $$$ for roads, water, and schools if we weren’t forced to pay for public employee pensions rather than force them to pay into social security like everyone else.

    But fear not. The state government has all those secret cash accounts saved for a rainy day.

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  6. BigDogatPlay says:

    Other than the insiders who latched on to deeply discounted shares up front, at least for this tax year the state isn’t going to get squat out of the Facebook IPO. And whomever the budget analyst was that convinced the governor and the Legislature it was a worthwhile idea to base budgetary decisions on, essentially, nothing needs to be fired.

    Facebook’s IPO was built on a house of cards with beach sand for a foundation. I was offered the IPO through my employee stock plan broker and actually did the due diligence that seems to have slipped the state’s mind prior to them making foolish predictions. Needless to say I did not buy in, and am very happy I didn’t.

    The entire IPO of Facebook is going to go down in history as one of the biggest losers of all time.

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  7. Vinyl Rules says:

    @Snarky

    Are you dancing on the grave of Facebook’s IPO? If so, then you’re celebrating more money being cut out of the state budget that would have gone to the services you use everyday. You know, that road you drive on, that tap water you use, the schools you likely went to. Rooting for failure seems to be the new fad in conservatism. Good luck with that.

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  8. Snarky says:

    How about another dose of reality, SarkyFish?

    The government claims it needs more of our money i.e. higher taxes.

    But they say little of how incompetent they are once they get our money.

    Note this mornings news item as just one example:

    “In one example, investigators found a single address in Lansing, Mich., that was used to file 2,137 separate tax returns.

    The IRS issued more than $3.3 million in refunds to that address. Three addresses in Florida, the epicenter of the identity theft crisis, filed more than 500 returns totaling more than $1 million in refunds for each address.”

    YES, INDEED, THE CRIMINAL GOVERNMENT NEEDS MORE OF OUR MONEY SO THEY CAN ISSUE MORE REFUNDS TO CRIMINAL GANGS.

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  9. Reality Check says:

    Facebook’s IPO was expected to be priced at a PE ratio of 100! That’s crazy. Either FB had advertisers ready to flood its web pages and lift earnings miraculously, or its price would decline. With a .07/sh loss last 1qtr, FB is now selling at 111 times earnings. Look out below!

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  10. Jim Sweeney says:

    I think Walter Pincus of the Post went a long way toward undermining the leaks claims in this column:
    http://www.washingtonpost.com/world/national-security/house-gop-shouldnt-rush-to-judgment-on-cyberweapon-leaks/2012/07/18/gJQAm2gauW_story.html

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  11. Sonoma Coma says:

    Let’s pray CalPers or SCERA didn’t invest in Facebook!

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  12. Sarkyfish says:

    Yes…interesting but I’ve already read about this in the financial pages, and “easy come, easy go” is not much of an opinion. But, say, back to the world of relevancy: what do you think about the White House leaking secret, defense department information?

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