Eduardo Saverin Renounces U.S. Citizenship Days Before Facebook IPO

Posted May 11, 2012

Facebook co-founder Eduardo Saverin is known for having his shares in the company diluted initially. After a lawsuit against Mark Zuckerberg, Saverin now owns roughly 4% of Facebook and he has just renounced his U.S. citizenship just days before the company is going to have an IPO.

Saverin told the story about how Mark Zuckerberg screwed over his equity to Ben Mezrich, which led to the book “The Accidental Billionaires: The Founding of Facebook, A Tale of Sex, Money, Genius, and Betrayal.” This book was then turned into the Academy Award winning movie “The Social Network.” After Zuckerberg and Saverin settled a lawsuit, Saverin cut off contact with Mezrich.

Facebook will likely be valued as much as $96 billion and will raise $11.8 billion from the IPO. Saverin’s stake is roughly 4%. At the high end of the IPO valuation, Saverin will become worth around $3.84 billion.

By giving up his U.S. citizenship, Saverin can minimize his tax liabilities in the U.S. Saverin was born in Brazil and is currently a Singapore resident. He is one out of several individuals that helped Mark Zuckerberg start Facebook when they were students at Harvard University.

?Eduardo recently found it more practical to become a resident of Singapore since he plans to live there for an indefinite period of time,? stated Saverin’s spokesman Tom Goodman. Canceling his U.S. citizenship can also help Saverin avoid paying capital gain taxes on future investments.

Reuven S. Avi-Yonah, the director of the international tax program at the University of Michigan law school said that Saverin won’t be able to escape all U.S. taxes. Americans that give up their citizenship will still have to pay an exit tax on the capital gains from their stock holdings even if they don’t sell the shares. Avi-Yonah said that giving up citizenship in advance of an IPO is “a very smart idea,” but ?once it?s public you can?t fool around with the value.?