Snap Inc.’s public offering was quite the event, with its stock jumping a staggering 45% on its first day of trading, pushing its valuation up to around $25 billion. This has made about 1,900 employees, who are now free to sell their shares post-IPO, suddenly liquid, likely bringing a wave of investment into Southern California. Let’s dive into how to potentially profit from this situation.
Interestingly, Snap sold its stock at a 55X revenue multiple despite not yet turning a profit—a bold move when compared to Facebook’s 14.5X and Twitter’s 4.5X. This shows that either investors have a strong belief in Snap’s growth potential, or they’re just desperate to get a piece of any significant tech deals available.
For those of us not directly involved with Snap, the IPO’s indirect effects, particularly on real estate, could still benefit us. History has shown that those with new wealth from tech booms often turn to real estate as a stable investment, protecting against the volatility of the tech market as seen during the 2000 dotcom crash.
Focusing on real estate, areas like Venice Beach, where Snap is headquartered, along with surrounding locales such as Marina Del Rey and Santa Monica, are prime targets for this new wealth. These areas could see a significant tightening in the housing market, especially post the 150-day lock-up period ending in the third quarter of 2017.
Now, for those looking to invest, properties that are likely to cash flow positively with a 20% down payment and hold long-term potential might be the best bets. Given the increasing property values since around 2012, influenced partly by tech companies like Google and Facebook setting up nearby, this trend might continue.
Even though Zillow suggests a mere 0.7% increase in Venice Beach property values over the next year, the actual market might heat up more than expected given Snap’s current stock performance. This presents a possibly lucrative opportunity to buy into this market before prices potentially climb higher.
For out-of-state investors, real estate crowdfunding platforms offer a chance to capitalize on the booming LA market. This method could become especially attractive as coastal real estate markets may enter another frenzy phase triggered by Snap’s IPO success.
Looking at San Francisco, with upcoming IPOs from big names like Airbnb and Uber, the same principle applies. The local real estate market might experience a surge similar to what was observed post-Facebook’s IPO, despite current market softness in high-end and condo sectors.
Overall, whether it’s buying directly in hot markets like Venice Beach and San Francisco or using real estate crowdfunding as a way to participate, the influx of wealth from Snap’s IPO offers various avenues for investors to potentially profit. The key is to stay informed and ready to act before these opportunities peak.
