SACRAMENTO – Twitter’s IPO on Thursday made a handful of Californians instant billionaires and millionaires—on paper at least. But will it make the bean counters in Sacramento happy?

Happy may be overstating it, based on early tax revenue projections from the state’s Department of Finance.

“A rough estimate is that it would generate somewhere in the neighborhood of $100 million in personal income tax revenue over two fiscal years,” said department spokesman H.D. Palmer.

That’s not chump change. But it’s not Facebook territory either. The social network’s IPO generated more than $1.4 billion in tax money for the state over the same period, Palmer said. A giddy legislative analyst’s office in early 2012 labeled the potential cash flow from that IPO “the Facebook effect.” This year it looks like the Twitter bump to California’s budget will be far more modest.

Palmer explains the difference this way: When Facebook went public in May 2012, the company said CEO Mark Zuckerberg would exercise an option to purchase 60 million shares at six cents each. The option was eventually valued at about $2.3 billion, leaving California expecting about $200 million in withholding from that single transaction. Palmer jokingly told reporters at the time that he would happily wash Zuckerberg’s windows or mow his lawns “on behalf of a very grateful state” still emerging from the recession.

Twitter’s IPO, in comparison, didn’t offer that “one off, large magnitude event,” Palmer said.

Another difference in the two IPOs involves restrictions on when employees and key investors can start cashing out. Facebook had roughly 270 million restricted stock units vest in the fall of 2012. Twitter’s filings reveal that just 12 million restricted shares will vest by next spring. The majority of the remaining 70 million restricted units should not start vesting until mid-2015, Palmer said.

The bottom line is that California’s budget, whose health is inextricably linked to the fate of its wealthiest residents and capital gains, will gladly take the extra tax revenue that Twitter’s IPO generates. But Evan Williams probably shouldn’t expect state employees to help with his household chores in gratitude.

Silicon Valley teams from Wilson Sonsini Goodrich & Rosati and Davis Polk & Wardwell advised Twitter on its IPO.


The Federal Aviation Administration on Nov. 7 released its so-called roadmap for regulating the use of non-military drones in the United States and, just like California lawmakers learned earlier this year, the agency is finding that balancing commercial, law enforcement and privacy interests in the issue is no easy task.

U.S. Sen. Ed Markey, D-Mass, said the FAA’s plan, which would rely on testing at six sites around the country, “falls far short” of ensuring adequate privacy protections for citizens. Markey has introduced his own legislation, which would require law enforcement to obtain search warrants before employing drones. Congress has directed the FAA to come up with a plan for overseeing commercial unmanned aircraft by 2015.

State Sen. Alex Padilla, D-Pacoima, introduced legislation this year that would have clarified that certain “offensive” uses of drones, such as spying on a gathering where the participants had a reasonable expectation of privacy, would make an operator liable for constructive invasion of privacy. Also, Senate Bill 15 would have required law enforcement agencies to obtain a search warrant, in some cases, to use drones for surveillance.

The bill cruised through the Senate but bogged down in the Assembly Public Safety Committee amid continuing concerns from privacy and civil liberties groups. The American Civil Liberties Union complained that the legislation did not go far enough to prevent government agencies from seizing privately captured drone images without a warrant. The group also wanted assurances that cities and counties could adopt more restrictive rules on drone use.

Padilla, who successfully authored legislation in 2012 mandating rules for driverless vehicles, could resurrect SB 15 next year.

State lawmakers also considered legislation this year that would have provided tax breaks to manufacturers who build unmanned aircraft. That bill stalled in the Assembly Appropriations Committee.

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