Moody's Investors Service called the drop in Facebook's share price a "credit negative development" in the wake of a Legislative Analyst's Office report last week on how the company's stock value could impact the state budget.
Facebook closed Monday at $21.92 per share, up from last week, but still 37 percent below the $35 price that state budget writers are counting on when a big round of insider transactions occur in November. The Analyst's Office said last week that if the stock price remains significantly below that $35 mark, the state could miss "hundreds of millions" in tax revenues that it has forecast in the first budget cycle since the Menlo Park company went public in May.
Both the LAO and Moody's noted that even a drop of that size would be less than 1 percent of the state's $91.3 billion general fund budget. And should the share price rise or other income streams strengthen, the state could overcome a stock malaise from the social media giant.
Moody's spokesman David Jacobson said the current share price has no bearing now on the state's A1 stable credit rating, currently second-worst in the nation behind Illinois according to Moody's. But he said a low stock price in November could have a negative effect on the state's credit rating.
"California's personal income tax revenue tends to be volatile because it relies heavily on top earners and those with high capital gains income," Moody's wrote in an update. "At 10.3 percent, the state's top rate for personal income taxes is one of the highest in the country and the state taxes capital gains at the same rate."