Founder and CEO of Facebook, Mark Zuckerberg, made multiple headlines this week; first his $105 billion company went public at a trading price of $38 US/share, and then a day later he made headlines again when he changed his Facebook status to "married."
Zuckerberg started Facebook while attending Harvard University. His rise to success, made famous by the film "The Social Network," has made him a multibillionaire in just eight years. On Friday afternoon, at the close of the frantic first day of public trading, Zuckerberg's net worth hit an astounding $20 billion, making him the 26th richest man in the world.
Just a day later, Zuckerberg married his girlfriend of nine years, Priscilla Chan. Zuckerberg and Chan met at Harvard before Zuckerberg started Facebook. According to People magazine, guests of the wedding thought they were coming to a surprise party celebrating Chan's graduation from UCSF medical school where she recently received her degree in pediatrics. The couple had been secretly planning their wedding for the past four months.
So is the timing of this wedding just a coincidence? Or is the day after Facebook went public more than just a convenient wedding date? We're going to go with the latter. Strategically, getting married after his company went public makes sense-dollars and cents, that is. Zuckerberg likely wanted to crystalize his net worth prior to the date of marriage for equalization purposes.
If California is anything like Ontario, then the net family property of each spouse is calculated by deducting a spouse's net worth on the date of marriage from their net worth on the date of separation and excluding all excludable property, such as inheritances or traceable gifts. s. 5 Family Law Act states that:
When a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them.
Zuckerberg being able to point to his exact net worth on the date of marriage is very beneficial for the young CEO. In the event that the couple's marriage breaks down, Zuckerberg will easily be able to calculate his deductible family property. This means that if the couple do not have a pre-nuptial agreement in place, Chan will only be able to share in Zuckerberg's gains from the marriage date forward.
So, should Chan be nervous? On Wednesday of this week, just days after Facebook went public, the company's share price had dropped 18% to $ 31.16 US/share, causing the value of the company to be called into question. If the value of the company continues to decline, along with Zuckerberg's net worth, where will this leave the couple if they were to divorce sometime in the future?
If Zuckerberg's personal net worth at the end of the marriage ends up being lower than his net worth at the beginning of the marriage, this will create a net family property of $0 (this is because net family property cannot be a negative number). Conversely, Chan is beginning her career in medicine, and is likely to have a much higher net worth at the end of the marriage than at the beginning. Accordingly, Chan could end up with a higher net family property than Zuckerberg, requiring her to pay him an equalization payment.
Now, no one's saying that Facebook is going to tank or that the newlywed's marriage is going to fail. But Zuckerberg was smart to time his marriage when he did, allowing for his net worth to be accurately and publicly valuated. Now, at least if his net worth declines and his marriage fails Zuckerberg will have an equalization payment as a silver lining to his divorce.