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IPOs Boost Demand Silicon Valley Housing
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2011 Jun 16, 9:40am 3,930 views 29 comments
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tdeloco
2011 Jun 21, 9:22pm
That's not what we're seeing in the overall SF bay area market. There are enough rich people to keep a few areas afloat, such as Palo Alto, Cupertino, etc. The way I see it, they are rich and can afford to lose that money.
The prices are down everywhere else in the SF bay area.
The prices are down everywhere else in the SF bay area.
They're even down in Cupertino and pretty much everywhere in Palo Alto. Lookup the threads on 1282 and 1292 Poppy. The former, which was listed for $1.268M supposedly sold for $1.4M cash according to a claim on the thread (everyone claims cash, but it's often not), and that's still down $231K from its 2005 sale at $1.631M:
They’re even down in Cupertino and pretty much everywhere in Palo Alto. Lookup the threads on 1282 and 1292 Poppy. The former, which was listed for $1.268M supposedly sold for $1.4M cash according to a claim on the thread (everyone claims cash, but it’s often not), and that’s still down $231K from its 2005 sale at $1.631M:
Down from the peak but is it up from last year or 2009?
Classic example of latest IPO:
LinkedIn Corporation Class A Co (NYSE: LNKD )
52wk Range: 60.14 - 122.70
Other IPO's too will join soon to this group.
Other IPO’s too will join soon to this group.
Don't forget P.
52 week 12.16 - 26.00
Currently at 13.25.
Down from the peak but is it up from last year or 2009?
Down is down, I don't see the reason to make a distinction. I'd probably need more data than I currently have to determine whether it's up from last year or 2009. I would guess it's at least flat, and government stimulus has helped in that.
If you really want to talk about IPO fueling home prices look at the real classic... Ariba, one of few B2B enterprise software companies making big gains in a short period of time back between 1999 and peak 2000.
LinkedIn and Pandora are going the other way.
"A surge in wealth from technology stock sales and initial public offerings is spilling into the Silicon Valley real estate market as newly rich workers bid up home values in suburban cities south of San Francisco."
I dont know what the writer is talking about, employees are banned from trading their stock options for 6 months, due to mandetory SEC lock out period. Another example of hype.. so common in the Bay Area.
Ariba stock prices first 12 months before losing 90% of its price.
Date Close
6/1/2000 91.44
5/1/2000 52.13
4/3/2000 74.19
April 3 2000 2:1 Split
3/1/2000 209.63
2/1/2000 264.50
1/3/2000 162.63
December 20 1999 2:1 Split
12/1/1999 177.38
11/1/1999 180.56
10/1/1999 155.00
9/1/1999 144.50
8/2/1999 139.00
7/1/1999 89.59
6/23/1999 97.25
open at 61.00
Besides its really too premature to even talk about IPOs fueling home prices since all employees are locked out for 6 months of trading.
No doubt, this is yet another reason why the trend articles are inappropriate at this point. The 6 month lockup has mostly gone ignored by these so-called journalists.
The 6 month lockup has mostly gone ignored by these so-called journalists.
Amazing sh*t.
ch_tah says
Down from the peak but is it up from last year or 2009?
Down is down, I don’t see the reason to make a distinction. I’d probably need more data than I currently have to determine whether it’s up from last year or 2009. I would guess it’s at least flat, and government stimulus has helped in that.
Well, considering there were few if any Bay Area IPOs in 2007-2009, and the point of this article is that IPOs are now fueling a new bubble, I would think your starting point of saying things are down is hugely important. Only people who bought in 2005-2006 care that prices are below that point. Just like people who bought a Nasdaq ETF in 2009 when it was at 14 don't care that it was at 50 in 2000. They are happy that the same ETF is now at 25.
thomas.wong1986 says
Besides its really too premature to even talk about IPOs fueling home prices since all employees are locked out for 6 months of trading.
No doubt, this is yet another reason why the trend articles are inappropriate at this point. The 6 month lockup has mostly gone ignored by these so-called journalists.
Wouldn't it be better if it were because of these IPOs causing these gains? If your view is these IPOs have nothing to do with price increases, what is the explanation then? That people do actually have this money sitting around and can afford to bid up these prices? You can't fall back on gov't aid anymore. There are no more liar loans. I guess one option is that the data is wrong or distorted for some reason.
Only people who bought in 2005-2006 care that prices are below that point.
I'm not exactly sure what point you're trying to make any more with either of the above two posts because they aren't clear, but here are the points I was making:
1) Prices are still down from the peak, even in so-called fortress areas (in response to someone saying the prices weren't down in those areas), except maybe Palo Alto.
2) The IPO money hasn't flooded in yet, so saying the IPO money is causing sales is wrong. Maybe the IPOs are giving people confidence in our economy, as you appear to be suggesting, but that's something different.
3) As a third point, I don't see this $1.63M median in the raw May data, but we'll see, because the sales data isn't complete: http://www.julianalee.com/reinfo/sold-PA.htm
That people do actually have this money sitting around and can afford to bid up these prices?
As some did back in 1999 buying up Ariba at 200/share or Yahoo at $350/share only to lose their savings by 90%.
While a few reap the gains and overpay for homes, like drunken sailors. As you can see no toxic loans, but still a bubble. Next step move jobs elsewhere as we have seen starting in 2000. So who wins and loses.
I dont know why Bernie Madoff stayed in New York City. He should of moved to Silicon Valley and he be doing the same thing without ever being caught or going to jail. He may even been some financial icon, like so many so called VCs.
This all leaves a black spot for real companies who could benefit from legit IPOs. But the media never talks about them, public ignores them, not sexy enough. They are the real underdogs.
We had over 340 public companies by 1994, all legit IPOs. But we never had a housing bubble nore the adnausum hype over it. Hype is all we have today.
1) Prices are still down from the peak, even in so-called fortress areas (in response to someone saying the prices weren’t down in those areas), except maybe Palo Alto.
I guess it depends on how you interpret what tdeloco was saying. I didn't read what he said as prices have not dropped below peak.
2) The IPO money hasn’t flooded in yet, so saying the IPO money is causing sales is wrong. Maybe the IPOs are giving people confidence in our economy, as you appear to be suggesting, but that’s something different.
I'm not fully sure how IPO options work. I have heard the 6 month rule as well. And maybe this article is jumping to incorrect conclusions. But if prices are going up in these areas, what is the cause?
But if prices are going up in these areas, what is the cause?
what prices going up ?
http://www.dqnews.com/Charts/Monthly-Charts/SF-Chronicle-Charts/ZIPSFC.aspx
ch_tah says
But if prices are going up in these areas, what is the cause?
what prices going up ?
http://www.dqnews.com/Charts/Monthly-Charts/SF-Chronicle-Charts/ZIPSFC.aspx
Thomas, for once I'll somewhat agree with you. I don't know how the article in the original posting came to their median price jump conclusions. I was just looking at your link earlier, and the two definitely seem to conflict. Maybe there is some updated information pending as corntrollio suggested.
I’m not fully sure how IPO options work.
I can tell by the terminology you're using.
Options are options. An option is an option to buy a share at a particular price within a particular amount of time.
An IPO is an initial public offering underwritten by a syndicate of investment banksters, and they almost always have a 6 month lockup period for shares because they don't want the market flooded with shares near the time of the IPO so as to make the company shares seem more scarce. This is a standard agreement, and any start-up business must include this in almost any contract involving shares for rank and file employees and also often with investors. Sometimes executives/directors are permitted to sell shares as part of the IPO, but often their other shares are still subject to the lockup.
I think you have exactly the question I do -- I'm not convinced prices are going up yet, but if they are, what is causing it? It's not IPO money because that money isn't really out yet except for certain privileged executives who sold some shares as part of the IPO like Reid Hoffman.
I think you have exactly the question I do — I’m not convinced prices are going up yet, but if they are, what is causing it? It’s not IPO money because that money isn’t really out yet except for certain privileged executives who sold some shares as part of the IPO like Reid Hoffman.
I can tell by the terminology you’re using.
No need to be a dick about it. What's wrong with calling it IPO options - fine, options for stock of an IPO. Is it really that different?
Did you actually read the article? Some people may have sold their shares using secondary exchanges.
Did you actually read the article? Some people may have sold their shares using secondary exchanges.
Sell shares which havent even been registered with the SEC..
under the 1933 act ? The purpose of an "IPO" is to register shares for approval by the SEC by filing an S-1. Like so many stock options they carry restrictions which prohibit transfers and assignment rights. Talk to a seasoned auditor or company CFO.. its not that simple.. I dont know what the writer was smoking.. must be some strong Ganja...
Thomas, ever hear of this company?
https://www.secondmarket.com/private-company
added: http://techcrunch.com/2011/01/29/kevin-rose-invests-in-facebook-on-secondmarket/
An IPO is an initial public
which normally include 1 year to vest for first 20% and remainder by some schedule over remainder 3-4 years. What happens down the road? who knows....
Leave for any reason, and you forefit all or unvested remainder.
Thomas, ever hear of this company?
https://www.secondmarket.com/private-company
SEC Rule 504, 505, 506...
http://en.wikipedia.org/wiki/Regulation_D_(SEC)
"Purchasers receive restricted securities, which may not be freely traded in the secondary market after the offering."
I think you have exactly the question I do — I’m not convinced prices are going up yet, but if they are, what is causing it? It’s not IPO money because that money isn’t really out yet except for certain privileged executives who sold some shares as part of the IPO like Reid Hoffman.
I can tell by the terminology you’re using.
No need to be a dick about it. What’s wrong with calling it IPO options - fine, options for stock of an IPO. Is it really that different?
Did you actually read the article? Some people may have sold their shares using secondary exchanges.
Look, you should learn more about the stock market and securities offering if you're asking basic questions like this.
Secondary exchanges have NOTHING to do with IPOs because the secondary exchange means that there was no IPO yet. These shares sell at a discount because they are not liquid yet and it's hard to value them.
And "IPO Options" doesn't mean anything. It's not a term of art. It shows you don't understand the article, because you don't understand IPOs or options.
which normally include 1 year to vest for first 20% and remainder by some schedule over remainder 3-4 years. What happens down the road? who knows….
Typical vesting in the Valley is 4 years, 25%/year. There are different arrangements, e.g. 1 year cliff + monthly vesting after that, but the 4 year thing is very common.
$60 * 18.3M = $1.1B in built in gains. 1,283 employees
Average per employee is sitting on $850K+ on the stock options alone. This does not even include ESPP, and other retirement sweetener.
Bullshit. Look at how many of those shares are held by key employees, directors, and officers. The rank and file do not average $850K at all. Start-ups don't have ESPP yet generally speaking. For example, Jeffrey Weiner has options to purchase 3,521,237 shares. That's almost 20% of the number you're quoting.
18.3M shares are granted through April 2011. option excercise price average is around $5 per share. @$66 per share market value, we are talking about $60 margin on average per option.
What is your source? Why not look at the S-1, which is more accurate. The average exercise price was lower than that -- more like $3.50.
Here is the link:
http://www.sec.gov/Archives/edgar/data/1271024/000119312511016022/ds1.htm
And again, the shares are subject to 6 month lockup. No one has cold hard cash yet, except the directors and officers whose shares were sold as part of the IPO.
And “IPO Options†doesn’t mean anything. It’s not a term of art. It shows you don’t understand the article, because you don’t understand IPOs or options.
Because I typed something quickly and used a shortened phrase means I don't understand IPOs or options - ok. Using that logic, your improper use of "your" when it should have been "you're" on a different thread means you don't have a firm grasp of the English language, and you shouldn't type anything else, since you are clearly confused. This petty crap is so tiresome...
"Also, it’s harder to compare a 13% interest scenario to a 4% interest scenario than your making it."
Average per employee is sitting on $850K on the stock options alone. This does not even include ESPP, and other retirement sweetener.
Vesting schedule is what for each employee ?
Only 4.5M options vested and exercisable of course is mainly officers (5 of them) holding 1/3 outstanding.
page F-25
http://www.sec.gov/Archives/edgar/data/1271024/000119312511142213/ds1a.htm
So yes, IPO does boost demand in silicon valley housing.
Of course but at what price ? Is the buyer of Linked shares a few weeks ago at $100 doing any better today ?
Might as well just have about 10,000 people write 100 checks for $1500/check and hand them off to each employee at LinkedIn..
that too will boast home prices.. from your savings account. Any different ?
Funny how people demonize banksters/wall street and glorify rich IPOs, yet they both leave you pennyless..
One left you with a loan you can repay the other left you with overpriced stock... Is there a difference ?
Typical vesting in the Valley is 4 years, 25%/year. There are different arrangements, e.g. 1 year cliff + monthly vesting after that, but the 4 year thing is very common.
Yes, that is very very true... monthly or quarterly.
Secondary exchanges have NOTHING to do with IPOs because the secondary exchange means that there was no IPO yet. These shares sell at a discount because they are not liquid yet and it’s hard to value them.
http://allthingsd.com/20110519/does-the-linkedin-ipo-validate-secondary-market-trading/
http://allthingsd.com/20110519/does-the-linkedin-ipo-validate-secondary-market-trading/
Yes, that doesn't contradict anything I said.
Form 424 filed on May 19, 2011 (page 66) is the most up-to-date.
It's possible I gave the wrong link, but typically the S-1 is filed with the SEC with many blanks, and those blanks are filled in when the IPO is actually about to happen. As such, the figures should be pretty close to what the Prospectus said unless I gave the wrong link.
Fair enough about Jeff Weiner. So instead of 18.3M shares, we have about 14.8M shares at $8 a pop, or $58 margin, which puts the built in gain around 670K per employee excluding Jeff.
There are many more insiders. The total I got was something higher than 5.68M shares. Then include another 22 key early employees: about 640K shares. So now we're at 6.32M, or more than a third. Then there are 54 other employees with significant shareholdings, unclear how many they had, and I'm not sure if that includes the 10 co-founders who are not with the company any more. The typical rank and file don't have that much. But yes, those approximately 90 people are doing quite well, because they got to sell shares IN the IPO -- they've already liquidated some of their holdings.
But also consider that that most of LinkedIn's rank and file employees are not vested yet, btw:
As of March 31, 2011, approximately 58% of our employees had been with us for less than one year and approximately 79% for less than two years.
Almost 4 out of 5 are at most around half vested, and more than half are at most around a quarter vested.
So many people (a) haven't been able to exercise options yet, b) are still subject to lockup. If LinkedIn continues to do well, some of these people will have significant money in the future, but not as much as you're quoting for the average by any means.
http://finance.yahoo.com/real-estate/article/112941/ipos-boost-demand-silicon-valley-mansions-bloomberg
A surge in wealth from technology stock sales and initial public offerings is spilling into the Silicon Valley real estate market as newly rich workers bid up home values in suburban cities south of San Francisco.
The median price of single-family houses sold in Palo Alto, home of Facebook Inc., climbed 20 percent in May from a year earlier to $1.63 million, the biggest jump since 2008, according to preliminary figures from research company DataQuick. In Mountain View, the base of LinkedIn Corp., prices rose 3.1 percent to $957,500, the ninth year-over-year gain in 12 months.
The advances are defying a U.S. housing slump that has sent national values to an eight-year low. Share sales such as the IPO of LinkedIn — which doubled on its first day of trading — and an expected offering from Facebook will fuel a boom in some Silicon Valley cities into 2013, said Kenneth Rosen, an economist at the University of California, Berkeley.
"It's just the beginning of the story and I suspect we'll see an explosion in the next couple years," Rosen, chairman of the school's Fisher Center for Real Estate and Urban Economics, said in a telephone interview. "You've got young people with real money, and it's not surprising they want to have a house."
#housing