The latest string of social media initial public offerings (IPOs) is fast creating a select handful of fantastically wealthy company founders and early stage investors. The financial headlines are full of details. The coming IPO of Facebook is estimated to put founder Mark Zuckerberg's net worth in the neighborhood of $20 billion, give or take a few billion dollars. LinkedIn's chairman Reid Hoffman is worth around $2 billion thanks to a recent IPO, and while he looks poor in comparison to Zuckerberg, he has enough excess capital to survive for many lifetimes.
The list goes on. Zynga's founder is now worth close to $2 billion while Pandora's CEO owns an estimated 3% of the firms market capitalization of $1.75 billion for an estimated worth of $52.5 million. Early stage investors in these firms are also doing well. Early Facebook investors tried to sell billions in stock a year ago when the implied value of the firm was closer to $70 billion. They may have lost out as the total IPO value is being pegged above $100 billion, but this still means huge wealth creation in just a few years.

Regular Folks Getting Rich
What gets less coverage is that a multitude of everyday employees are getting rich from the social media IPO wave. The Facebook IPO is expected to create in excess of 1,000 millionaires, many of whom came to work for the networking wonder story by sacrificing current salary for huge upside potential via company stock and related stock options. A recent article in the San Francisco Chronicle even detailed a Korean artist who was hired to paint murals in Facebook's office and chose stock instead of cash for his work. The savvy move was estimated to earn him $200 million once the IPO takes place.

Again, Facebook is hogging the headlines because of the scale of wealth creation it is generating for those associated with its beginnings. But other unexpected millionaires include around 30 investors and employees associated with LinkedIn. Around a dozen initial investors and employees from Pandora have shared in the largesse brought by the IPO. Zynga went so far as to detail that it could see its competitive edge decrease from its new class of wealthy employees who might be less inclined to log long hours creating its popular games now that many are now worth millions. The risk also exists for Facebook, as roughly one third of its 3,000 employees will soon be rich.

These fears could be overblown. Past tech IPOs from the likes of Google, which at the time of its IPO had around 1,900 employees, have done just fine even though many employees struck it rich and broke out on their own to either enjoy their new wealth or commit the capital to their own start-up venture. The same goes for employees of Apple over the past decade - some of whom have enjoyed the gains of a stock that has risen from $10 to more than $500.

The Bottom Line
These unexpected individuals now have some interesting decisions to make with their windfalls. Mark Cuban is a prime example of how to diversify one's wealth prior to the bursting of a bubble. He famously minimized his exposure Yahoo shares after the firm acquired his for more than $5 billion, saving himself billions as Yahoo plummeted after the dotcom bubble burst. Others may choose to sit tight, in hopes that their respective social media firms continue to grow sales, and eventually grow profits for the benefit of all new shareholders.

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