Eaten alive? We asked financial experts if the IPO boom will really change San Francisco

Lyft co-founders John Zimmer, left, and Logan Green cheer as they ring a ceremonial opening bell in Los Angeles, Friday, March 29, 2019. On Friday the San Francisco company's stock began trading on the Nasdaq exchange under the ticker symbol "LYFT." less Lyft co-founders John Zimmer, left, and Logan Green cheer as they ring a ceremonial opening bell in Los Angeles, Friday, March 29, 2019. On Friday the San Francisco company's stock began trading on the Nasdaq ... more Photo: Ringo H.W. Chiu, Associated Press Photo: Ringo H.W. Chiu, Associated Press Image 1 of / 28 Caption Close Eaten alive? We asked financial experts if the IPO boom will really change San Francisco 1 / 28 Back to Gallery

Lyft is already on its way, and Uber, Airbnb, Slack, Postmates and Pinterest are all expected to follow.

A tidal wave of IPOs is poised to hit the San Francisco Bay Area and as privately held companies go public, thousands of new millionaires are expected to be made overnight. How will a flood of new money impact the city? Will it change things at all?

It depends on who you ask.

Some have reported the newly rich will buy up cars and houses, open trendy restaurants, or throw outrageous parties with hand-carved ice sculptures. Other predictions skew more conservative: "Things can't get much worse," concluded San Francisco Chronicle columnist Caille Millner in a recent dispatch.

ALSO READ: Lyft plunges below IPO price, sending cautionary message to other unicorns

It's hard to know what to expect in the coming months, so SFGATE reached out to five experts in various fields — from finance to real estate and tech — to glean their predictions for the upcoming IPO season. We've compiled their responses to several questions below.

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Do you think the IPO "boom" will actually happen?

Patrick Carlisle, chief market analyst, Compass: "I have a tendency to think the 'flood of millionaires' reports are a bit over-hyped. On the other hand, it is pretty much unparalleled that one relatively small city would have such a large number of very, very large private companies either stating that they will go public, saying that they are thinking about going public, or there are rumors about them going public. All those companies certainly add up to some tens of thousands of employees."

Sam Dogen, founder, Financial Samurai: "I think what's happening is the mania that's being created by the media, and by conversations with friends and family, is more hype than reality. I think, for example, the headlines, like the New York Times' "Thousands of New Millionaires Are About to Eat San Francisco Alive," is overhyping the amount of demand, which I think could cause the potential supply of houses to increase even further.

"You look at the latest [housing] supply figures, and they're up year-over-year; they're at seven-year highs. Supply is up 80-plus percent in places like San Jose. If you look at San Francisco, the supply is up 20 percent. The supply numbers are already significant. All this fear of missing out is going to unlock and awake a sleeping bear of supply. I think the number will go up in April. I think the likely scenario is the IPO mania will be good for demand."

What might it look like, and how will it differ from years' past?

R "Ray" Wang, principal analyst and founder, Constellation Research Inc.: "In the past, the rewards [of IPOs] were distributed very evenly. Silicon Valley had more control telling the bankers, 'We want to spread the money around.' Lately, the bankers have gotten so greedy that there's not a lot of winners, not a lot shares distributed around. [This IPO round] might not happen the same way. Instead of 200 [employees at a company] doing really well, it might be more like 50 employees."

Dogen: "We're at a different time in the market. Facebook went public in 2012. That was the end of the bottom of the market. Once Facebook went public, then the real estate market really started heating up. This time, prices are up 80 percent to 100 percent since 2012. Instead of igniting the real estate market, it's a slow, quick simmer."

What companies will do especially well?

Wang: "Slack is gonna do awesome."

Dogen: "Uber and Lyft are not profitable. We don't know exactly for sure what these companies' numbers are because you don't know until they file their IPO. Only the private investors know the numbers. I think the most promising company is Airbnb, and I think on a relative basis a $38 billion evaluation seems accurate."

What will these newly minted millionaires be buying or investing in?

Wang: "A lot of these folks who make it big don't go on to buy a house, yacht and a Bentley convertible for the hell of it. They say, 'We got lucky. This is my fourth start-up and the first to hit it big.' They'll do angel investment, volunteer work, something with a purpose. I also think a lot of people will buy in Tahoe, on the Nevada side, because it doesn't have the same taxes as here. An IPO lets them do that. A few people will go out and splurge, but I don't think that's the majority case."

Dogen: "I think we'll see an impact on the luxury auto market. We'll see more remodeling of old homes, and expanding of homes with additions."

Carlisle: "Affordability is an issue for everybody. Typically, when people find themselves significantly wealthier, one of their first thoughts is to either buy their first home, or to buy a larger home, where perhaps they want to raise a family.

"Employees at [companies preparing to go public], most of them are going to continue to stay working at the companies. If they're going to buy a home, they'll buy one locally — though not necessarily in San Francisco."

How will the real-estate market be affected by the influx of IPOs?

Herman Chan, real estate agent, Sotheby's: "Affordability was already an issue even before the IPO situation. The people who are going to be millionaires overnight, they're not competing with the first-time buyer, they're not driving up prices on family homes. It's just not the same field. Unaffordable housing is a problem, but it has nothing to do with people who are going to be bajillionaires overnight."

Dogen: "Yes, there will probably be 10,000 new millionaires who will be liquid over two years. Some of them probably already bought homes. Some of them want to relocate out of the rat race because it's so crazy expensive. Ten-thousand is definitely not the right number of people who will want to buy homes compared to the potential supply onslaught that will come on."

Carlisle: "It's kind of hard for me to believe that the Bay Area could swallow a big burst of home-price increases after all the increases we've seen in the last seven years. Then again, this dynamic of all the IPOs occurring at the same time ... we've never seen anything like this."

Wang: "If you look at real estate numbers, buying property in Palo Alto is at something like $1,500 a square foot. The point being, with the average home being so expensive in these areas, [home ownership] is already out of reach for most people.

"The way I look at this is everyone's trying to get out of California. People make their money and go. Even if you have the money to build the house you want to, it is so hard to build it here. The regulations are so ridiculous. You'd probably want to build it in Colorado or a purple state or be a blueberry in Texas. You're incentivized to take your money out of here."

How has San Francisco already been impacted?

Bree Long, managing director of new development, Compass: "There's been a renewed vigor and interest for buyers, especially those who were taking their time to buy ... We attribute much of that uptick to seasonality, but a lot of the feedback we're getting from buyers is that the pending IPOs are encouraging them to get out into the market place now, before this new wave of capital hits the market. It's not so much the pending would-be millionaires who are shopping for homes; it's the folks who are concerned that those people are going to enter the market. They want to buy homes before the market is inflated."

Carlisle: "Anecdotally, I have heard that there are buyers who have moved forward to speed up their buying to avoid what they've read about an influx of IPO millionaires. They're hoping to get in before that competition is added to the market. I've also heard anecdotally that there are sellers who have held off from putting their homes on the market because they want to wait for the supposed influx of IPO millionaires."

Chan: "I think it's already happening in the real estate market in San Francisco, and the buyers are back. Last year, there were only one or two offers. Now we're back to getting three or four. Q3 and Q4 of last year weren't that great. This year because of IPO exuberance, the market is hot again. I have people calling me and saying I need to get ahead of the market. I've got to get in before it gets really crazy. But structurally nothing has really changed, but culturally it has changed."

Amy Graff and Michelle Robertson are SFGATE producers. You can email them at agraff@sfgate.com and michelle.robertson@sfgate.com.