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. Professionals

    The Best Financial Modeling Courses for Investment Bankers

    Obtain information, both general and comparative, about the best available financial modeling courses for individuals pursuing a career in investment banking.
  2. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  3. Investing

    4 Billionaires Who Dropped Out of Harvard

    People who became successful despite dropping out of Harvard University.
  4. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  5. Stock Analysis

    Match.com IPO: Is it a 'Buy' or Should You Pass?

    Demand for relationships is always high. Now you will have a way to directly invest in the relationship market. But is it priced fairly?
  6. Fundamental Analysis

    Investment Banks: Not a Good Bet Right Now?

    Investment banks might appear safe to investors at the moment, but they're probably more dangerous than advertised.
  7. Professionals

    Common Interview Questions for Investment Bankers

    Explore some of the most commonly asked questions in an interview for an investment banking position, along with suggestions for winning answers.
  8. Markets

    4 Companies That Made Billionaires Poor

    Learn how four once-successful companies in the stock market lost their way, and how these companies turned billionaire investors poor.
  9. Stock Analysis

    Toys 'R' Us Stock Doesn’t Exist: Here is Why

    Learn why investors cannot trade stock in toy retailer Toys 'R' Us. This privately traded company could be a hot IPO candidate for the future.
  10. Investing

    Deutsche Bank Undergoes a Significant Revamp

    The Deutsche Bank's reorganization is being called one of the biggest shake-ups at an investment bank in recent years.
  1. When did Facebook go public?

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center