Facebook Co-Founder Eduardo Saverin Lost Money By Renouncing Citizenship

The great debate over Facebook co-founder Eduardo’s Saverins motives for renouncing his U.S. citizenship may finally be settled as it seems as though Saverin has actually increased his tax bill by doing so.

Saverin famously renounced his U.S. citizenship last fall. After the news broke, politicians set out to change laws in order to punish him, the blogs went crazy and accusations were rampant.

A few worthy sources touched upon the notion that Saverin’s tax bill would be inflated, but now we have proof.

Award winning statistical analyst and financial blogger Felix Salmon provides us with the following:

“What’s more, I can easily see how the frothy Facebook valuations being seen on SecondMarket contributed to the debacle that was the Facebook IPO. Facebook executives with vested equity had the opportunity to sell their Facebook stock in early 2012 at valuations north of $80 billion; at the peak of Facebook fever, just before the IPO, the shares traded as high as $44 each. Given that Facebook was by far the most liquid stock on SecondMarket, and had weekly auctions from November 2010 onwards, it was pretty reasonable to consider SecondMarket to be a reliable price discovery mechanism.”

The point is that last fall, Facebook was worth a lot more on the private market than it is after its IPO debacle. The proof lies in the private market price discovery quoted above by Simon.

When Saverin renounced his citizenship, his tax bill was calculated as if he’d sold everything he owned as valued at that time. The price of his Facebook stock was much higher than it is now, leaving him at a loss.

In other words, Saverin left when Facebook was the most valuable it had ever been, leaving him (so far) with a higher bill than if he’d stayed.

At this point the only way Saverin’s actions will have actually saved him any money is if the stock goes above $40 a share. Whether or not that’s going to happen is seriously questionable at this time.

If you are considering renouncing your citizenship due to IRS problems, or are facing other tax issues, contact the professionals at JG Tax Group today. Our staff has over 120 years of combined IRS experience and will help you secure your financial future.