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 with Robert Frank, a weekly guide for wealthy investors and consumers. Register to receive future editions, straight to your inbox.
SpaceX’s IPO is expected to create thousands of new millionaires and several new billionaires. Although current and former employees won’t be able to sell their shares right away, some are already thinking about how to spend their windfall.
This new wealth could have a ripple effect on luxury real estate markets near SpaceX’s office hubs and increase spending on watches, private jet charters and other status symbols, experts told CNBC.
Real estate agent Gerard Bisignano said he recently received inquiries from several longtime SpaceX employees looking for homes in California’s South Bay area. They range in age from their 30s to early 40s, he said.
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“They themselves seem incredulous that they’re suddenly going to be able, in some cases, to buy a house for their parents. They’re going to have all this discretionary income that allows them to really do what they want,” said Bisignano, a partner at Vista Sotheby’s.
SpaceX’s California office is a short drive from the wealthy coastal communities of Manhattan Beach, Redondo Beach, Hermosa Beach and Palos Verdes Estates. Bisignano said he expects many SpaceX employees to snap up high-end homes in the area. He noted that there was a similar wave of purchases in the neighborhoods around Facebook headquarters after that company’s 2012 IPO, with home values there jumping 21 percent.
Bisignano said he also anticipates an influx of interest in second homes in other scenic California locations like Mammoth Lakes, Palm Springs and Tahoe.
Texas real estate agent Gary Dolch said he’s seeing similar interest from SpaceX employees in the greater Austin area, with SpaceX’s Bastrop campus located about 30 miles from downtown Austin. Some plan to buy soon after taking out a margin loan, while others wait until the IPO lockup period ends, he said.
Potential buyers’ tastes run the gamut, from luxury condos on Lake Austin or Lake Travis to 1,000-acre ranches further from the city, Dolch said. He added that he was optimistic that the IPO would boost Austin’s luxury market, which has weakened over the past three or four years.
“We feel like we’re on the cusp of Austin’s next wave of expansion, fueled by this technological advancement,” he said.
The nouveau riche rarely stop their dream home spending sprees, Bisignano said. He expects buyers to compete for homes with four-car garages to accommodate their brand-new Ferraris.
And while sports cars are a popular choice, luxury watches are a more practical status symbol for everyday use.
Paul Altieri, founder and CEO of Bob’s Watches, said a watch is often the first luxury purchase after a major liquidity event. He said customers generally opt for Rolexes because they are instantly recognizable. Models like the Daytona, GMT-Master II and Submariner are the most popular, he added.
“The watch becomes a reminder of that accomplishment every time they put it on,” he said. “The stock certificate stays in a brokerage account. The watch wears on your wrist.”
John Shmerler, CEO of The 1916 Co., a retailer of luxury watches and jewelry, said customers who have waited for years are often willing to pay more for used watches from trophy brands like Patek Philippe and FP Journe.
The madness doesn’t stop there. Although some SpaceX employees have already flown first class, the IPO will allow many to travel privately.
DJ Hanlon, executive vice president of sales at Flexjet, and Kolin Jones, founder and CEO of Amalfi Jets, said their private jet companies have received inquiries recently specifically related to the SpaceX IPO.
Jones said customers are already chartering jets to celebrate the occasion with a trip.
The top choice for celebrating a liquidity event is Las Vegas, especially for younger travelers traveling without children, Jones said. Miami and Cabo San Lucas, Mexico, are also popular destinations.
Travelers looking to take the whole family on vacation, however, are turning to Aspen, Colorado and Yellowstone National Park, Jones said. And Disney World is a classic choice for local families with young children who want to avoid the hassle of airport security, he added.
With new wealthy clients, Amalfi Jets’ sales team sometimes receives calls from wealth managers asking to cancel their clients’ charters or downgrade to smaller jets, Jones said.
“It’s sometimes funny to see clients arguing with their wealth manager, saying, ‘No, it’s my money, I want the Gulfstream,'” he says. “There will be a lot of people taking a private flight for the first time, and I think it will be a really fun spending spree.”