A company that didn’t exist a decade ago is about to go public at a ~$100 billion valuation.That spectacular value creation is making a lot of the ~3,000 people who work at that company, Facebook, very rich.
And hooray for that. They deserve it. Well done, Facebook!
Anyway, a lot of those ~3,000 people who have gotten very rich live in Palo Alto, California. And a lot of them have already cashed out a lot of their super-cheap Facebook options on the secondary markets. And a lot of them, perfectly reasonably, are now putting that money to work.
What do you want to buy when you have finally “monetized” all that hard work you’ve done over the past few years, especially if you’ve been crammed into some crappy apartment?
And you’re in luck–because there are lots of houses in Palo Alto.
Unfortunately, there are also lots of people shopping for houses in Palo Alto right now.
Who are they?
Your Facebook colleagues.
You see, you’re not the only Facebook employee who has just converted those super-low-strike options into “Ka-ching!”
A Palo Alto resident tells us that frantic Facebook employees have helped drive the Palo Alto real-estate market up 30%-60% in the past 6 months.
(That’s not an official estimate. Others say there has been a pop but that that the appreciation is much lower.)
As evidence of this frenzy, he forwarded the listing below–a 4-bedroom on Lincoln Avenue that originally listed for $1.6 million.
This house, which the resident described as a “tear-down,” sold immediately for $2.1 million.
According to the Palo Alto resident, there were 11 bids for the house, 7 of them in cash.
And most of those bids, the resident says, came from Facebook employees or the Facebook community (ex-employees, service providers, etc.)
How does the resident know this?
Because the market is so hot right now that real-estate agents encourage prospective buyers to write letters to the sellers to set their bids apart. And in the letters to the sellers, prospective buyers apparently go on about their Facebook affiliations.
The same thing happened when Google went public, the Palo Alto resident adds. Newly rich Googlers drove prices into the stratosphere. But the Google Boom came about six months after the IPO, when the employee stock lockups expired. Thanks to the private secondary markets, which allow employees to sell stock before a company goes public, Facebook employees have already begun cashing out.
Unfortunately, as Facebook employees are no doubt quickly learning, “rich” is a relative concept. Having boatloads of money doesn’t help you much if everyone who wants what you want also has boatloads of money.
So, happy house shopping, Facebookers! Welcome to the worlds of inflation and supply-and-demand.
Some more pictures of what $2.1 million in cash buys you in Palo Alto right now:
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