Mark Zuckerberg may have to sell approximately $1.67 billion of company stock in the Facebook IPO to pay off taxes he’ll end up owing the IRS when he exercises options to buy 120 million shares.
The social network’s CEO will owe taxes on gains related to the award of options, Facebook said this week in its initial public offering prospectus. The options were given to Zuckerberg in 2005 and expire in 2015, and he’ll sell stock to cover liabilities, according to Facebook.
“We expect that substantially all of the net proceeds Mr. Zuckerberg will receive upon such sale will be used to satisfy taxes that he will incur upon his exercise of an outstanding stock option to purchase 120,000,000 shares” of common stock, according to the filing.
Zuckerberg, 27, will now likely become one of the world’s wealthiest people with a stake in Facebook that could be worth as much as $28.4 billion. His company, which on February 1 filed to raise as much as $5 billion in an IPO, is now reportedly discussing a potential valuation of $75 billion to $100 billion.
At the high end of that spectrum, assuming approximately 2.51 billion Facebook shares outstanding, each share may then be worth roughly $39.79. The shares awarded to Mark Zuckerberg carry an exercise price of 6 cents. Assuming Zuck purchases all 120 million shares at that price, his gains would come to about $4.77 billion.
Zuckerberg’s tax rate will likely be in the 35 percent range, meaning his total tax bill would be about $1.67 billion.
Facebook had a received a valuation of at least $94 billion, or about $40 a share, in an auction of its shares on the private market earlier this week.
Related articles
- Facebook’s Zuckerberg may face $2 billion tax hit (money.cnn.com)
- Zuckerberg’s taxes on IPO? How about $2 billion (news.cnet.com)
- Tax Aspects of Facebook’s IPO (taxprof.typepad.com)
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