Silicon Valley awaits Facebook millionaire buying spree

Facbeook's IPO filing sets off a chain of events that will ultimately see shares in the company available for public purchase and trade. Within the company, it also stands to turn, according to Reuters, about 1,000 employees into instant millionaires.

And when those newly minted, modern-day Thurston Howells hit the tony streets of the area surrounding Facebook's Menlo Park, California headquarters, it's anyone's guess what they'll be buying, and how much.

Dot.com days back?

Businesses contacted by Yahoo! Finance Canada were, for the most part, hesitant to call it an impending gold rush. But there's a quiet optimism at the prospect of a glut of suddenly-flush twenty- and thirty-somethings, and companies ranging from real estate brokerages and car dealerships to banks and even comic book stores are bracing for an expanded pool of disposable income.

"It's still too early to really tell where all this will lead, but there's an excitement in the air," says Ron Burton, general manager of Carlsen Audi in Palo Alto. "From what I've heard, it's like the dot-com days are back."

Those days of heady expectations and inflated real estate values may have crashed and burned when the dot-com bubble burst in 2001, but Wendy McPherson, mid-peninsula regional manager with two Coldwell Banker Regional Brokerage offices in Menlo Park, says much of the optimism of that era is already visible in the region.

It's a seller's market

Facebook is only the latest in a growing wave of tech IPOs in the Silicon Valley, and the impact is already being felt in a tight real estate market that McPherson expects to tighten even further. Menlo Park and Palo Alto are right in the middle of a tract between San Francisco and San Jose that's already seeing unprecedented demand.

"Including Facebook, we're expecting at least 18 companies to go public this year, just in our area, with a total of about 15,000 employees among them," says McPherson. "Right now, we have no inventory, we have buyers coming out our ears, and we have no sellers. If a decent house comes on the market, it will receive 6, 8, maybe 10 offers. I've been doing this for 35 years, and I've never seen such a backup of buyers as I've seen now. It's pretty astounding, and this is even before Facebook has gone public."

Once it does, McPherson, who describes the current situation as "classic supply and demand," expects things to get even tighter as the real IPO-fed spending begins. While she says the timeline for this extends out at least 8 to 10 months, some employees and early investors have already sold their respective stakes privately. And that's driving increased business activity on the street.

"Already, traffic is heavier, and restaurants are busier," she says. "It's a good time to be a contractor and a good time to be in the furniture business."

The good times extend beyond high-tech employees, as a cluster of high-profile venture capital firms, most located a short drive away from Facebook's offices, are also benefitting from the uptick. Palo Alto-based Accel Partners, which paid $12.5 million for an 11.8 per cent stake in the company in 2004, is looking at a potential $1.2 billion-dollar payday based on top-end valuation estimates of $100 billion. Digital Sky Technologies, another VC firm, could cash in to the tune of $500 million for its 5 per cent slice of the company.

When it hits the street, the influx of personal liquidity could impact a broad range of businesses, but those more dependent on discretionary spending could benefit the most.

Luxury market gears ups

"Our entire business plan was built around putting these two businesses in the right areas," says Gary Anderson, managing director of the Palo Alto-based Fisker Silicon Valley and McLaren San Francisco dealerships, which sell high-performance plug-in hybrids and supercars, respectively. "Most definitely we would expect to see an incremental increase in consumer spending on luxury items."

Anderson says this week's Facebook announcement is only the beginning.

"People have been talking about it, but Facebook's IPO program has only just begun, so nobody's got money in their wallets yet," he says. "I'm sure many people are already dreaming of how they're going spend a good portion of it."

Facebook aside, Anderson says strong growth in the broader tech market has already been a key business driver.

"We deal with tech people every day here, and our niche market, if you will, has been pretty active before this news," he says. "There's still a great sense of optimism in the Silicon Valley."

Despite the rising tide of optimism, the 2001 meltdown continues to cast long shadows, and Coldwell Banker's McPherson says that's not necessarily a bad thing.

"Even though we have all this craziness going on, I think a lot of these guys have learned their lesson," says. "They're not going to be so crazy and make these crazy purchases they made in 2000. They're not going to pay $50 million for a property."

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca