Will Facebook and Groupon Rescue California?

Here’s an interesting (and hopeful) article from Chris Nolan (the smart tech finance writer, not the director). In it, she suggests that the coming wave of IPOS for social companies headquartered in California may be just the ticket to dig us out of the fiscal hole we’re in.

California Governor Jerry Brown is going to have a very successful third term since he’ll probably be able to solve – or claim he’s solved – the state’s budget mess next year. Brown – the Steve Jobs of politics – is going to be the beneficiary of what can only be called pent-up demand in both the venture capital business and the stock market. In other words, people who need to sell their stock to earn their keep (venture capitalists, angel investors) have plenty of customers (wanna-be shareholders). And the stock market’s increasingly looking healthy enough to support large-scale stock offerings.

Basically, one or more of Big Social (Facebook, Groupon, Zynga, Twitter, LinkedIn, etc.) may go public in the coming year. When they do, the knock-on effect on the regional economy is going to be significant…and that is going to lead to a surge in tax collections.

Now on one hand, that’s worth breathing a sigh of relief.

On the other, it’s worrisome, because it will – again – delay actually sorting out our fiscal house of cards. I don’t want my kids dealing with this; I want us to deal with it now.

…we’ll see.
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5 thoughts on “Will Facebook and Groupon Rescue California?”

  1. I honestly cannot fathom how someone could buy into anything submitted in this massive bout of wishful thinking, let alone, consider the person who wrote it as remotely informed pm what they are writing about.

    You could take the combined value of all of the above mentioned companies (who btw, are not public and therefore, their valuations are at this point in time pointless to rely upon) along with say apple, intel, and microsoft and it wouldn’t even come close to solving the 500 billion in unfunded pension liabilities for the state of california.

    And given the current crooks inhabiting sacramento, any funds received would be pissed away on something as awesome as “high speed rail” for all 50 people who would actually want to take a train from LA to Sacramento.

  2. Brown is … the Steve Jobs of politics? If I smoked a whole bunch of medicinal cannabis, would that be funny?

  3. Thanks for warning me never to pay attention to that writer and blog. Let’s try a bit of back of the envelope:

    Hypothetical value of Facebook + Groupon + a bunch of social hoi-polloi: $100 billion in good round numbers.

    Maximum capital gains tax rate payable to California only: 10% in round numbers.

    Size of CA fiscal crater: $10 – 25 billion, this year alone, depending on whether you count previous spending cuts or not. And neglecting the Godzilla-sized actuarial deficit of the state pension plans as noted above.

    So if all of those companies go public, and if all of the shareholders are stupid enough to cash out in one year, and all of them are domiciled in California, and all of them pay the maximum tax rate – it might fill part of the hole for one year. Good luck with that. Not that the idiots in Sacramento wouldn’t try – building windfall income into the base budget is part of how we got here.

    More realistically, business will improve for Tesla and Porsche dealers in the Bay Area, and the upper end of the local real estate market will get some support. Some of those employees cashing out will leave and create more businesses and some of them will succeed. The new IPOs might get a good bounce, or not, depending on whether the state and Federal government can resist the ongoing temptation to further bork the economy. Good luck with that, too.

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