Facebook IPO fuels Bay Area spending boom
The wait for tables is getting longer at Buck’s, a popular breakfast spot for the tech elite and a weather vane for the Silicon Valley economy. Here, like everywhere else, Facebook is the talk of the town.
“Charles Schwab was in the restaurant the other day, and I asked him to hook me up with some Facebook shares,” said Jamis MacNiven, owner of Buck’s, in the wealthy suburban enclave of Woodside. “He told me even he can’t get Facebook shares.”
The new tech boom officially gets underway Friday when Facebook Chief Executive Mark Zuckerberg rings Nasdaq’s opening bell remotely from the company’s Menlo Park, Calif., headquarters, launching the largest initial public offering of stock in Silicon Valley history.
The social media company’s projected $100-billion valuation heralds a new era of prosperity in a region famous for minting fortunes.
Wealth has trickled down to employees and investors who cashed in their shares ahead of the IPO on private exchanges. Others are spending in advance of their big payday, fueling an economy that’s already humming thanks to the Bay Area’s thriving technology sector.
Upscale stores and restaurants are packed. Good luck getting a table at Madera in Menlo Park, not far from Facebook’s headquarters. The see-and-be-seen restaurant at the swanky Rosewood Sand Hill hotel is booked solid for lunch almost daily.
Luxury cars are flying off dealers’ lots. In San Francisco, San Mateo and Santa Clara counties combined, luxury vehicles accounted for nearly 21% of new car registrations from April 2011 to March 2012. That’s almost double the national average, according to automotive research firm Polk.
“I have rarely, if ever, seen the luxury mix this high,” said Tom Libby, lead North American forecasting analyst at the Michigan company. “These data clearly show that there is wealth -- and a lot of it -- in these counties.”
And not just from Facebook. A decade after the dot-com crash, a new wave of IPOs -- Zynga, LinkedIn, Yelp -- has padded fortunes and confidence here. Apple and Google are going strong. Venture capitalists are pumping billions into start-ups, including some catering to the rich but time-starved techie elite.
There’s Uber, which provides young tech titans with on-demand limousine service at the touch of a smartphone app. Exec provides freelance go-fers to fetch dry cleaning and run other errands.
Then there’s Lux Delux, a start-up run by Andy Hsieh, brother of Tony Hsieh, founder of online shoe retailer Zappos. The invitation-only travel service books getaways to Las Vegas, providing VIP perks such as tables at the hottest restaurants, rock-star access at shows and penthouse suites at hip hotels.
Snooki and the Situation would do well to watch their well-tanned backs. “Silicon Valley,” a new reality show planned for the Bravo network, is gunning for “Jersey Shore.” Its executive producer is Randi Zuckerberg, Mark Zuckerberg’s sister.
“We’re the best thing happening in America,” said one tech entrepreneur, who asked to remain anonymous so he could speak candidly. Celebrities “might be more famous, but this is where the true value is being created.”
Facebook millionaires are expected to put some of that wealth into a red-hot housing market.
Although the Bay Area has yet to fully recover the ground it lost since its July 2007 peak, home prices in some of the most desirable parts of San Francisco and Silicon Valley are rivaling the bubble years.
Finding a home listed under $2 million is becoming a challenge in the San Francisco neighborhood of Noe Valley, whose sunny microclimate and historic character are attracting techies in T-shirts and jeans carrying fat wallets.
Real estate agent Jeff Appenrodt said a client of his recently was among 51 bidders on a three-bedroom, one-bath Edwardian-style home built in 1903 that was showing its age. The client, a tech entrepreneur, made an all-cash offer 50% over the $849,000 asking price -- and got thumped. The house sold for $1.4 million to a rival bidder.
“Nowhere in the whole entire United States is there a market like this,” Appenrodt said.
In Palo Alto, not far from Facebook’s headquarters, the median home price in the 94306 Zip Code hit a record $1,606,750 in the first quarter, according to DataQuick, a residential real estate information firm in San Diego.
Palo Alto builder James Witt said two technology investors fought over his latest $3-million modern home. He has built and sold five houses in the last 20 months. And the market is only expected to get more heated when Facebook employees can cash in their paper wealth 180 days after the stock starts trading.
“We’re back to the Kool-Aid-drinking times,” Witt said.
A ranch-style tear-down in Palo Alto was recently listed for nearly $1.2 million. The listing agents didn’t even bother to stage it. They just strung up construction lights and handed out hard hats at the open house. The result: The home got 38 offers and sold for $450,000 above the asking price.
Real estate agent Ken DeLeon, a former high-tech lawyer, said he has already sold $100 million worth of houses this year. He bought one of his brokers a midnight-blue Maserati GranTurismo as a reward for the long hours. He bought himself an Aston Martin.
“Everyone feels confident again,” DeLeon said. “Everyone has the mind-set that their net worth will be higher next year.”
For some, the over-hyped Facebook IPO signals another speculative tech bubble.
Restaurateur MacNiven thinks Silicon Valley is in another kind of bubble. It has become too insular.
“We only talk about ourselves. We don’t know what goes on outside Silicon Valley,” he said. “I guess we are becoming pretty ingrown, and truly a bit smug. That doesn’t look good on Silicon Valley.”