This doesn’t make sense. They’ll reap the capital gain on the issuance, and capital loses are limited.
Where am I wrong?
I think Californika is hoping for the capital gains on the insiders who live and work in the state. They most likely received the stock for near zero. So the state will have gains to tax no matter if the stock falls below the issuance price. However, insiders have to hold the stock 800 - 880 days and who knows where “fakebook” will be by then. Also, one could quit the company, take up residence in another state and sell later.