Facebook And More Silicon Valley Legacies Built On Sand: $100B Estate Plans At Risk

Downsizing the utopian vision becomes a real risk when you’re funding it on volatile corporate stock. Maybe what the Zuckerberg future needs is a pension fund.

The ultimate scale of Mark Zuckerberg’s family foundation has bounced around over the years. Back in 2015 when it was announced, it was going to start with $3 billion in cash.

SEC filings show Zuckerberg sold the Facebook stock to make that happen. In the meantime, what was then a $45 billion lifetime commitment grew to the equivalent of $60 billion today.

Liquidating 99% of his fortune for charity in his lifetime can do a whole lot of good in the world. The problem is that as long as the dream is funded in stock, it’s all just paper.

Notional wealth is a moving target

After all, six months ago, that $60 billion Facebook stake was valued at more like $80 billion. Someone who made a dynastic philanthropic plan at that point would now need to go back and rip out $20 billion worth of ambition.

Likewise, at the bottom, the stock sank below the level where it was before Zuckerberg announced the foundation in the first place. While it didn’t stay there long, the lesson is clear. 

Planning around a wide-swinging stock price is at best a random walk. You just can’t predict how much wealth you have to work with a month from now, let alone on a generational timeline.

To get real clarity, any Silicon Valley billionaire needs to make the tough choice and exit the company that created so much wealth in the first place.

Look at Bill Gates, who has effectively sold out of Microsoft or given his shares away.

It’s not his company any more. He’s not consulted on any of its decisions and its future only abstractly concerns him now.

Gates trades his Microsoft shares for "pension" style stocks like Berkshire Hathaway. They're reliable, liquid and easy to value.

But Zuckerberg wants to keep control of Facebook in the present, even though theoretically his interest is maximizing the value of the company so it can fund bigger philanthropic goals.

He’s not selling the stock and he definitely isn’t giving it away. That’s not a problem unless you’re trying to scale the foundation now to fit its ultimate financial footprint.

In theory, the foundation already has $3 billion in cash to play with now, so it can pay staff and build the infrastructure it will need a generation down the road.

Will its ultimate shape match the assets it has to work with when Zuckerberg finally liquidates? Facebook might be a $3,000 stock at that point, in which case enough money will be available to fund the most utopian program.

On the other hand, dot-com history reminds us that it could just as easily end up worth $30 a share or less, depending on timing and the way its audience evolves.

Planning a $10 billion foundation requires vastly different parameters from thinking in terms of $1 trillion, to put it mildly. And since the value of Zuckerberg’s stake will oscillate in between, the plan needs to embrace both extremes.

Of course the $3,000 scenario is awfully easy. The foundation could buy what it wants then. It’s probably not realistic, but the point is that we just don’t know what Facebook will ultimately be worth.

Paper money dreams

In the meantime, the way Zuckerberg talks about the LLC makes it sound more like a family office venture capital fund than a traditional grant-writing machine.

The company will theoretically invest in people and technologies that make an impact on the global landscape. If they earn a profit in the process, the proceeds get reinvested.

In theory, conventional non-profit entities will eventually receive donations, but the way Zuckerberg frames this side of the strategy, it’s no different from the way Coca-Cola or any other corporation spends money on community service.


Needless to say, this Silicon Valley venture capital model means that every dollar invested in the portfolio isn’t available to immediately make much of a difference in the lives of people on the ground.

Maybe the initiatives Zuckerberg wants to invest in will do the heavy lifting. From what I’ve seen of the venture-funded world, they’ll probably simply spend his money while talking big about developing disruptive services to make existing charities more efficient. If one out of four placements survive, it’s a win.

But that’s Zuckerberg’s world and it’s his money, so if he’s more comfortable picking winners than writing checks, he’s the one calling the shots.

Either way, a starting stake of $3 billion to allocate over the next three years provides a robust pool of capital, but there apparently isn’t a lot of urgency in putting the other 99.4% of the LLC’s assets to work any time soon.

If the global situation really starts to look dire, I hope Zuckerberg is one of the first to step up and fund the philanthropic fight. In the meantime, the shares remain inert in the LLC accounts, doing only the most theoretical good or harm.

One little-reported detail on those shares: while Zuckerberg argues that this arrangement isn’t earning him the traditional tax break for pure charitable donations, the tax impact was always going to be negligible.

About 90% of the Facebook stock that Zuckerberg controls is already earmarked for a combination of trusts. Unless he revokes the grants, that wealth is going out of his estate and out of the government’s reach.

This means that the trusts end up exchanging the shares for equity in the LLC. If the company's investments do well, the trust beneficiaries will reap the rewards.

If those beneficiaries include one or more favored non-profit groups, then yes, the LLC’s charitable spin is justified. We’ll just have to wait out the decades until Zuckerberg’s estate settles to find out.

Until then, the exchange looks more like a way for the trusts to start diversifying out of what is otherwise a heavily appreciated single-stock portfolio.

Since Facebook doesn’t even pay dividends, this would normally force him to lighten his stake in the company now and then to fund a typical Silicon Valley lifestyle. However, Zuckerberg took enough cash a couple of years ago to meet anyone’s near-term cash flow needs.

While the IRS took its share and there were vague rumblings about charity back then, he’s still had at least $700 million to play with since Facebook went public in 2012.

That money should have generated a minimum of $20 million a year in no-risk current income invested in plain vanilla Treasury bonds. Depending on the scenario, there may be a whole lot more money circulating through the Zuckerberg household.



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