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Thursday
Feb022012

Facebook IPO Expected to Boost Silicon Valley Economy

Justin Sullivan/Getty Images(MILLBRAE, Calif.) -- Facebook's initial public offering (IPO) is expected to be a boon not just to the technology sector but to local business owners who've said they are smarter and better prepared to avoid the disaster of the previous dotcom bubble.

Leonard Mezhvinsky, a developer in Millbrae, Calif., has spent the past three years building a property in Hillsborough, 30 minutes north of Facebook's headquarters in Menlo Park.  He expects the $13 million, six-bedroom house to be completed in August or September, just in time for a Facebook employee -- newly rich from the initial public offering -- to spend some money. The IPO could mint hundreds of potential millionaires as soon as the company goes public.

"It's very simple," Mezhvinsky said when asked how Facebook's IPO would affect local real estate.  "The Facebook IPO will create in an instant multiple millionaires who when they sell their stock to cash out will be looking for higher-end properties in and outside San Francisco."

Mezhvinsky, a principal at Sieger Property Development, said he had seen an increase in activity in the local real estate market.  He said the growing interest in real estate may be because of multi-millionaires cashing out stock, or anticipating cash, after initial public offerings from such nearby companies as gamemaker Zynga in December and social media site LinkedIn last May.

Early employees, or those with higher tenure, such as founder and CEO Mark Zuckerberg and many of his Harvard peers, along with the executive team, are most likely to have the most shares among the company's more than 3,000 employees.

Mezhvinsky expects the wealth created from Facebook's IPO to dwarf that of of Zynga and LinkedIn combined, although it will not be instantaneous, as employees with stock options will have to wait months to cash in their stock, and the newly wealthy usually take some time to adjust to their newfound wealth, he said.

"They still live in apartments and small houses and suddenly they have $20 million of IPO stock," said Mezhvinsky.

There are also rumors of speculators snatching up property near Facebook's headquarters, in the hope of flipping properties to newly rich employees.  But Mezhvinsky said developers were much more cautious now than they were before the dotcom bubble more than a decade ago.

"The developers who weren't cautious are probably bankrupt now.  Those who were semi-cautious are now fully cautious," he said. "But as the economy improves in three or four years that cautiousness will go away as it always does."

Copyright 2012 ABC News Radio







ABC News Radio