Close-up of the coastline near Palos Verdes
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A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future editions directly to your inbox.
SpaceX’s IPO is expected to create thousands of new millionaires and multiple new billionaires. Current and former employees may not be able to sell their shares right away, but some are already planning how to use the proceeds.
The newfound wealth could have a ripple effect across the luxury real estate market near SpaceX’s office locations, leading to more spending on watches, private jet charters and other status symbols, experts told CNBC.
Real estate agent Gerald Bisignano said he recently received inquiries from several longtime SpaceX employees looking for housing in California’s South Bay area. The age range ranges from mid-30s to early 40s.
Hear SpaceX President and COO Gwynne Shotwell discuss the historic IPO on Friday at 5 a.m. ET. Watch in real time on CNBC+ or CNBC Pro streams.
“They can’t believe that all of a sudden they’ll be able to buy a house for their parents,” said Bisignano, a partner at Vista Sotheby’s. “They’ll have all that discretionary income and be able to do what they really want to do.”
SpaceX’s California office is a short drive from affluent coastal areas such as Manhattan Beach, Redondo Beach, Hermosa Beach, and Palos Verdes Estates. Bisignano said he expects many SpaceX employees to live in luxury homes in the area. He pointed to a similar buying spree around Facebook’s headquarters after the company’s initial public offering in 2012, where home prices rose 21%.
Bisignano said he expects other scenic areas in California, including Mammoth Lakes, Palm Springs and Tahoe, to also see a surge of interest in second homes.
Texas real estate agent Gary Dolch said SpaceX’s Bastrop campus is located about 30 miles from downtown Austin, and he sees similar interest from SpaceX employees in the greater Austin area. He said some people are planning to buy immediately after taking margin loans, while others are waiting for the IPO lock-up period to end.
Dolch said homebuyer preferences range from luxury condos on Lake Austin or Lake Travis to 1,000-acre ranches outside the city. He added that he is optimistic that the IPO will boost Austin’s luxury market, which has softened over the past three to four years.
“It feels like we’re on the cusp of the next wave of Austin expansion with this tech company’s rise,” he said.
Mr. Bisignano said the newly wealthy rarely splurge on their dream home. He expects buyers to compete for homes with four-car garages that are perfect for a brand-new Ferrari.
While sports cars are a popular choice, luxury watches are status symbols that are more practical for everyday use.
Paul Altieri, founder and CEO of Bob’s Watches, said watches are often the first luxury item purchased after a major liquidity event. He said customers typically choose a Rolex because it’s instantly recognizable. Models such as the Daytona, GMT-Master II and Submariner are the most popular, he added.
“This watch will remind you of that accomplishment every time you wear it,” he said. “Stock certificates are kept in a brokerage account. Watches are worn on the wrist.”
John Schmerler, CEO of luxury watch and jewelry retailer 1916, said customers who have waited years are often willing to pay a premium for used watches from trophy brands such as Patek Philippe and FP Journe.
Splurges don’t end there. Some SpaceX employees may have already flown first class, but the IPO will allow many more to fly privately.
DJ Hanlon, executive vice president of sales for FlexJet, and Colin Jones, founder and CEO of Amalfi Jets, said they have received recent inquiries from both private jet companies specifically related to SpaceX’s IPO.
Jones said customers are already chartering jets to celebrate the occasion with travel.
Jones said Las Vegas is the top choice for celebrating liquidity events, especially for young travelers without children. Miami and Cabo San Lucas, Mexico are also popular destinations.
But Jones said travelers looking to take the whole family on a trip are leaning toward Aspen, Colorado, or Yellowstone National Park. And Disney World is a classic choice for local families with young children who want to avoid the hassle of airport security, he added.
Jones said that when Amalfi Jets’ sales team has a newly wealthy client, they sometimes receive follow-up calls from wealth managers asking them to cancel the client’s charter or downgrade to a smaller jet.
“It’s sometimes funny to see clients arguing with asset managers saying, ‘No, it’s my money, I want a Gulfstream,'” he said. “There will be a lot of people flying privately for the first time, and I think it will be a really fun expense.”
