Waiting for the IPO … then what?
It is becoming increasingly more common for Bay Area residents to literally get rich quick. It’s not some pyramid scheme or a scam. It is rather in the form of an IPO. Initial Public Offerings are minting millionaires by the masses and where that money goes can change the pulse of many things, real estate included.
Financial forecasters said at the beginning of 2019 that there were certainly some IPOs to watch. Zoom, Uber and Pinterest to name a few. The forecasts indicated that these IPOs will thicken many a wallet, but mostly in the form of $10 million windfalls instead of $100 million.
But where that money goes is what we really have to keep an eye on. That flow of cash entering the housing market changes the game for many. It can make the high-end housing market soar to new heights and can also find its way to places like Lake Tahoe, Arnold or Palm Desert, where vacation homes are attractive. Even in residential markets like San Carlos or Redwood City, where its becoming difficult to even enter the market without a good $2 million, IPO money will trickle down in the form of all-cash offers or by a savvy investor scooping up rental properties.
But before any money can reach a housing market or go toward anything, it has to be liquidated, which in many cases cannot happen immediately. Many companies subject their employees to six-month holds before their shares can be sold. Following that time frame, many times there are additional restrictions on selling shares. For instance, you can sell 20 percent at six months, and then can only sell 10 percent of the existing shares every three months. The period of time after a shares of stock are locked up can range from 90 to 180 days.
Since it is becoming common for wealth to turn overnight once a company goes public, many have found loopholes, however. There are some institutions that will use stock as collateral and allow it to be used in exchange for credit. And as more and more people begin to experience wealth through IPOs, we are likely to see more creative ways to tap into that money even before it is liquidated.
It will be interesting to see how these IPOs will change our current trends, especially as we enter spring and summer, our busiest times of the year for residential real estate. If you are anticipating wealth following an IPO, be sure to speak with a financial planner or analyst who can guide you to make sound financial decisions so you can maximize your wealth and opportunities. And if you’re looking to invest that money into real estate, call us! We can help!