Facebook at 50 (Dollars A Share)

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Facebook at 50 (Dollars A Share)

by James F. McDonough, Jr. on September 30, 2013

Facebook’s Initial Public Offering (IPO) received a great deal of attention, especially after the price of its stock dropped shortly after its first day of trading. The decline in price dominated the news for weeks. While driving to the office this week, I listened to Bloomberg report that Facebook’s stock price hit $50 a share on September 26, 2013. The Bloomberg report validated the planning strategies undertaken by the Facebook insiders and demonstrates that the timing of a transfer may yield incalculable benefits.

On June 4, 2012, I wrote about a Facebook insider who expatriated from the U.S. to Singapore. Mr. Eduardo Saverin relinquished his U.S. citizenship in September 2011, months before the public offering on May 18, 2012. The act of expatriation causes the departing United States citizen to recognize gain on a deemed sale of all of his assets. Assuming a market value of $25 per share at the time of expatriation, the timing of Mr. Saverin’s departure appears to have saved him hundreds of millions of dollars in income and estate taxes. Given that the IPO price was not set and the sluggish economy, the figure actually used may have been lower than my estimate. After all, we were coming out of a recession and there were no other comparable transactions in

the market. Any estimate of value in 2011 was tempered by doom and gloom of a moribund economy and an uninspired or non-existent IPO market. The timing of Mr. Saverin’s departure worked to his advantage.

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