The Market Timing of Citizen Saverin

When Eduardo Saverin gave up his U.S. Citizenship in September 2011 — and subsequent discovery thereof in April 2012 — he insisted the move did not have to do with taxation.   He would owe an exit tax on the value of the holdings as of the time of the renunication however.

According to (a neat interactive graph at) Second Market, Facebook was trading at $31.66/share in September.  Assuming he was obliged for 15% of the value (his cost basis being trivial), that would put $4.75 of his stake due to be taxed (whether California would get its 10.3% cut as well is another question)

Facebook now trades at $19.  With 2.14 billion shares outstanding and Saverin’s stake in IPO documents filed with the SEC at 53 million shares he would not be a 5% owner and may have sold in the window that just opened.

Assuming the entire stake was sold around $20 it’s hard to have “hard feelings” about netting 1.5 billion or so after tax (given earlier sales) but certainly isn’t the citizenship-dumping haul he may have been hoping for with the appreciation he had expected and looked to benefit from by Singapore citizenship.  The haul from Facebook may appreciate with other securities, in a zero capital gain environment but surely not what he hoped for.

The IPO debacle that has been Facebook is probably overstated — had they gone public as a midcap, then surged and then had a 50% retracement it would be akin to many other large cap tech stocks.  But Saverin’s renunciation was the original sin of the IPO process.

There remains the intriguing schadenfreude, that Saverin did not sell, and sits with the looming tax bill waiting for the stock to “bounce back” but it does not.  Are his shares among the 1.2 billion looming in December instead?  Clearly one of the most transformative companies of our era, Facebook doesn’t deserve a single digit stock price to punish one disloyal citizen, but if it were to happen and hold there it would be a deliciously cold revenge to see both the gains and his citizenship wiped out.

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