This is from August, but as this even is currently occurring, it makes sense to talk about it now, and I never saw it in another thread. If this belongs in the stock thread, or anywhere else, by all means please merge it or lock it.
This seems a little…. strange…bet your state budget on the future of a stock price…. Basically, California bet that when a bunch of restricted stock get converted over to regular common shares this week, for Facebook, they employees will sell off, and give the state 4 billion dollars in tax. The employees were not allowed to sell for a given time period (this is the second set of shares for Facebook to be converted in this fashion).
However, as the price is less than half at what the state predicted, they said their budget is in trouble, as they based their budget on that assumed income of employees being taxed on selling their shares at $35 ($38 IPO price I believe).
http://economy.money.cnn.com/2012/08...cebook/?iid=EL
Is this different or the same as betting on the price of oil? I would argue a whole lot more risk is involved in this, and there is no way California should have assumed a $35 price would hold this much later after the IPO ($3 to the negative is a huge loss, but to me it doesn't seem low enough to assume for a state budget). I would also argue that the tech industry may have its own set of arguments making it possibly more volatile than the commodity market. You could argue some of this money was a guarantee… like the oil income in Alberta, but it seems a high bet for me.
California Budget Bet on Facebook Shares
