Facebook's Poor Stock Performance May Hurt California State Budget

Facebook's Limp Stock Could Leave One State Strapped For Cash

Facebook's underwhelming stock performance could end up spelling trouble for the state of California.

The state was slated to net more than a billion dollars in tax revenue once the Menlo Park-based company went public, according to a recent report in the Los Angeles Times. But Facebook's stock hasn't done as well as people hoped, and the cash shortfall for California may instead end up in the hundreds of millions, according to an analyst quoted in the LA Times.

Nothing is set in stone yet, but if California does lose out as a result of Facebook's stock fizzle, Golden State residents won't be the only ones hurt by the stock plunge. Any number of small investors have lost hundreds or thousands of dollars since Facebook went public -- even as Morgan Stanley and the deal's other underwriters have made a tidy profit off the foundering stock.

A group of shareholders have filed suit against Facebook and its underwriters, claiming the company had troubling information in hand prior to its IPO -- projections showing that Facebook's revenue is likely to fall in the coming months -- and that Facebook made this knowledge available to certain Wall Street insiders, but not to the general public.

Meanwhile, for California, it's a bad time to come up short a few hundred million. The state is running a budget deficit of about $15.7 billion, according to the LA Times, and the effects are being felt everywhere from public schools to the court system to the farmworker communities where people live in desperate poverty.

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