UNDATED (CNN) -- Facebook founder Mark Zuckerberg has the fate of California's budget on his shoulders. Facebook stock plunged to an all-time low Thursday. But, it's not just investors feeling the pinch. California could lose hundreds of millions of dollars.
The opening excitement has faded fast as Facebook's stock continues to tumble with hundreds of millions of dollars now at risk, according to a report this week from the legislative analyst's office. Governor brown's budget is based on a Facebook sales price of $35 a share, yet the stock closed at $20.04, well below the benchmark that California is banking on to bring in $1.9 billion. Jon Coupal with Howard Jarvis Taxpayers Assoc. says, "We have to rely on steady, predictable sources of revenue and not believe that we're going to have pink unicorns pooping gold nuggets to solve the budget problem."
The initial public offering from Facebook was supposed to generate big revenues from capital gains taxes that investors pay after they sell a stock, but it could end up being phantom revenue. Political analyst Kevin Riggs says, "We saw that last year. The governor depended on an assumed $4 billion in extra revenue to balance the budget. The $4 billion never materialized and so the budget was out of balance almost as soon as he signed it."
But the brown administration says, the stock price for Facebook is no reason to panic. H.D. Palmer with the California State Finance Department says, "The issue isn't where the Facebook stock is today. It's where it's going to be in November that counts."
November is when the state expects Facebook employees to begin selling their shares, but a low sales price could be a critical hit to California's coffers. Also in November, the governor's tax initiative, Brown's Budget, assumes his tax measure will pass in November.
If so, Facebook's shares will be taxed at a higher rate, but if it fails, California will have $400 million less than what's now on the books.