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.
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.