When a hugely successful company such as Facebook makes an initial public offering (IPO) of their stock, fortunes are made, and not only by the company owners. Facebook co-founder, Mark Zuckerberg, for example, will make an estimated $14 billion when his company goes public this spring. Many employees of Facebook will probably also reap millions if they own company stock.

The big money of a successful IPO most often goes to the owners, investors and senior management of the firm. Lending institutions which bankrolled the company may also earn profits if they likewise own equity in the firm. Frequently, employees of the firm, from middle management to rank and file personnel, who have company stock or stock options, or who own stock in their 401(k)s or other retirement or pension plans, also make money as the stock rises.

SEE: The Ups And Downs Of Initial Public Offerings

IPO Jackpot
Stories of million-dollar windfalls for the founders of companies with successful IPOs are legendary: Nike, Apple, Microsoft, Google, LinkedIn, Facebook, Groupon and Pandora, just to name a few. These firms are familiar because of their high-profile presence on the Internet, in the media and in the marketplace, where they generate considerable revenue.

Not every employee of a major firm which issues an IPO gets company stock. However, for the lucky and hard-working employees who owned shares in these firms, their checks from liquidating their stock often bore six, seven and even eight, figures. Here is a story about an ordinary guy who was as smart as he was lucky, and who will probably hit the Facebook IPO jackpot.

David Choe is a 36 year-old Korean-American artist whose art has been exhibited in museums. Choe was employed to paint murals on the walls of Facebook's first office, in Palo Alto, California. He took a long shot gamble and declined a cash fee of several thousand dollars for his work. Rather than take the money in the U.S. coin of the realm, Choe opted for an equal amount in Facebook stock.

That prescient decision will probably earn Choe about $200 million in Facebook stock when the firm goes public. As far as we were able to determine, no other artist in the history of the world was paid such an enormous amount of money for a mural.
It's estimated that 1,000 Facebook employees will also become millionaires when they cash in their company stock. The names of these overnight millionaires are usually not publicized, only the names of the biggest IPO winners hit the media: Steve Jobs and Steve Wozniak of Apple; Larry Page and Sergey Brin of Google; Ellen Levy and Reid Hoffman of LinkedIn.

However, substantial cash windfalls have made numerous but publicly unnamed employees of companies which launched successful IPOs, millionaires. Many others who did not garner millions nevertheless became well-off, if not fabulously wealthy.

The Bottom Line
Employees of start-ups and maturing firms that have not yet gone public but intend to, may do well to keep these stories in mind when offered company stock in place of cash. Of course, not all IPOs are equal, and some fail to generate the hoped-for millions.

Related Articles
  1. Budgeting

    5 Apps Every Investment Banker Should Have

    Learn more about how apps for various platforms benefit investment banking, and discover five apps all investment bankers should download.
  2. Fundamental Analysis

    Will Health Care Continue to Drive IPOs in 2016?

    Learn why health care IPOs may be slowing in 2016, and how Obamacare, poor previous filings and economic factors are affecting the health care sector.
  3. Stock Analysis

    Analyzing Porter's Five Forces on JPMorgan Chase (JPM)

    Examine the major money-center bank holding firm, JPMorgan Chase & Company, from the perspective of Porter's five forces model for industry analysis.
  4. Investing Basics

    Inside IPO Roadshows

    Understand more about IPO road shows. Learn the reasons why an IPO road show is important for the success of a company's public offering.
  5. Stock Analysis

    If You Had Invested Right After Berkshire Hathaway's IPO (BRK.A)

    Learn how much you would now have if you had invested right after Berkshire Hathaway's IPO, and find out the classes of shares that you could invest in.
  6. Stock Analysis

    Is Now the Right Time to Buy Coty? (COTY)

    Find out whether fragrance and color cosmetics powerhouse Coty deserves a place in your portfolio. Will recent acquisitions help turn the company around?
  7. Economics

    Does Big Money Hurt or Help Clinton and Rubio?

    Marco Rubio and Hillary Clinton lead their parties in raising money from Wall Street. Is that a help or a hindrance?
  8. Stock Analysis

    Moderna Therapeutics: An IPO Candidate in 2016?

    Find out the reasons why 2016 may be the year when highly valued biotech company Moderna Therapeutic files for an initial public offering (IPO).
  9. Stock Analysis

    Domo Inc: An IPO Candidate in 2016?

    Learn about key information on Utah-based technology startup Domo Inc. and how the Domo dashboard differentiates itself in the world of business intelligence.
  10. Stock Analysis

    GoDaddy Inc: How It's Fared Since the 2015 IPO (GDDY)

    Evaluate GoDaddy's stock performance since its April 2015 IPO, and determine how you would have fared had you invested in the company on day six.
RELATED FAQS
  1. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  2. When did Facebook go public? (FB)

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  3. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  4. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  5. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  6. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center