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State Awaits 'Facebook Effect'

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Facebook LogoLike many stock-market watchers, the state of California is eagerly awaiting the day Facebook goes public.

The social media giant could submit paperwork for its long-anticipated initial public offering as early as next Wednesday, sources familiar with the matter told The Wall Street Journal.

The unnamed sources said the IPO could generate as much as $10 billion for the company, which, according to the Journal, would be valued between $75 to $100 billion.

If the IPO occurs, profits from Facebook stock transactions would be taxed as capital gains, and California could receive hundreds of millions in tax revenues.

“In the coming months, the state's revenue forecasts will need to be adjusted somewhat to account for the possibility of hundreds of millions of dollars of additional revenues related to the Facebook IPO,” read a recent Legislative Analyst’s Office report on Gov. Jerry Brown’s proposed 2012-13 budget.

The Legislative Analyst's Office also cautioned that the extra cash flow, which it termed “The Facebook Effect,” could be a “relatively small percentage of California’s overall capital gains,” depending on the overall performance of the stock market.

It will be difficult to predict exactly what the profits from Facebook’s IPO will mean for the state budget until company investors and employees file tax returns in April 2013, according to the report.

The Associated Press reported earlier this month that tax revenues from Google Inc.’s IPO in 2004 did not reach the state treasury until two years later. Sixteen Google investors and employees paid the state as much as $380 million in taxes, roughly the same amount as the salaries of more than 3,000 government workers.

Morgan Stanley is the top contender for managing the IPO, according to the WSJ. The financial services firm will likely net tens of millions of dollars in fees for the deal.

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