After Friday’s slow start to trading thanks to a NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) trading glitch, Facebook Inc (NASDAQ:FB) saw its stock close at $38.23. Market watchers were curious to see what would happen in the company’s first full day of trading on Monday and that fizzled as well; the stock closed down 11 percent to $34.03.
For some investors, they’ve lost money. For Facebook founder and CEO Mark Zuckerberg, his fortune dropped by $2.1 billion on Monday and at the time of this writing, it has declined an additional $1 billion thanks to today’s market. Don’t feel bad, Zuckerberg still has a hefty $15.5 billion net worth.
But perhaps someone who could worry about the lost fortune is the new Mrs. Zuckerberg nee Chan. She married Zuckerberg on Saturday–one day after Facebook had its IPO.
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Is this a coincidence? Did it have something to do with Zuckerberg defining his net worth? Was a prenuptial agreement signed by Chan?
No, the Zuckerbergs have not commented on this.
But according to matrimony legal experts, what Zuckerberg earned prior to his marriage, will only be his afterwards, according to The New York Times.
The two obviously reside in California and it is one of a dozen states that has community property laws that layouts the division of property between two spouses or registered domestic partners. The rule basically states that anything as a spouse’s property before marriage is then deemed separate. This could include dividends from previously-owned stock or rent from an income-generating property owned prior to the marriage. Then, after getting married, what either partner earns or brings in now community property.
Jo Carrillo, a law professor at the University of California Hastings College of Law in San Francisco said to The New York Times, “This means the day after the marriage, whatever anyone earns is co-owned by the marital estate.”
But community and separate property can become gray through years of marriage. Separate property stays that way unless money is commingled with “community,” or joint money with problems arising if the couple isn’t careful about recording either where the money either came from or who paid for what, explained Carrillo.
For the remaining states using equitable division rules, the court fairly divides things up at divorce.
Will Chan Get Money from Facebook’s Growth?
The question is now whether Zuckerberg’s wife can reap the benefits of her husband’s growing value in the Facebook stock.
Chris Donnelly, head of the family law department at Leland, Parachini, Steinberg, Matzger & Melnick in San Francisco said, “The bigger gray area is the growth of value during the marriage. That is the 800-pound gorilla, or in Mark Zuckerberg’s case, the 800-ton gorilla.”
The usual circumstances would have Zuckerberg’s previously-owned stock remaining as separate property. But Zuckerberg’s job will have him contributing to Facebook’s growth, which would also encompass its stock, with “the fruits of the efforts may accrue to the community” said Donnelly. And really, a court would most likely allocate some growth to Chan should they hit divorce court.
He added, “She would be entitled to something. It’s a huge gray zone, which is why in California you can create an agreement that spells out property very clearly.”
As for a prenuptial agreement, this could have been a remedy, stating a potential percentage of the growth that would be defined as “community” and what would be defined as separate.
Facebook spokesman, Larry Yu, would not comment on whether two either signed a prenuptial agreement or whether she had any Facebook stock under Priscilla Chan before the marriage.
Some experts had said that Ms. Chan, a newly minted medical school graduate from the University of California, San Francisco, could benefit as well. Prior to moving to California years ago to be with Zuckerberg, Chan reportedly asked the Facebook CEO to sign a relationship agreement; this included issues such as how much time they would spend together.
Just imagine what she would do with a prenuptial agreement.
Carrillo said, “If she had legal advisers, I would hope they would have encouraged her to also consider a prenup. It protects the non-owning spouse because in California, we have a set of formalities that require the prospective spouses to take some time to negotiate the document, typically with their respective attorneys. The non-owning spouse will get disclosure and know what the other spouse owns and owes, and can choose or not, based on the disclosures, to make decisions.”
Legal experts noted that couples are not required to make their prenuptial agreements public so if an agreement between the two exists, it will most likely remain private.
4:36PM EST Update: With the close of trading, Facebook is down 8.55% today and another -0.95% after hours. With these new numbers, we estimate that Zuckerberg has lost $2 billion today, and close to $5 billion since Friday. At this rate, he will not have to worry about a pre-nup.