The Bay Area has been defined by high housing costs, snarled traffic, and income inequality in the age of tech. But this year, a slew of tech companies wishes to make their initial public offering, or IPO, meaning it could get even worse.
That’s what analysts have been warning as Uber, Lyft, Airbnb, Slack, Postmates, and Pinterest hope to become publicly-traded companies. With that, a flood of wealth comes to the region — or, as the New York Times put it “thousands of new millionaires are about to eat San Francisco alive.” To anticipate the impacts on what this means for San Francisco, Supervisor Gordon Mar called a hearing at the Board of Supervisor’s regular Tuesday meeting.
“We have seen the aftermath when major startups go public before, including Facebook and Twitter, transforming hypothetical money into real money, and minting thousands of millionaires and billionaires overnight,” Mar said. “As a City with one of the largest wealth gaps in the world, we must better understand the consequences of this extreme inequality and a rapid injection of new wealth.”
The city will look at how the IPOs could impact business tax revenues, housing costs, and gentrification. Mar is also requesting information and policy recommendations from the Budget and Legislative Analyst on how past public offerings from large companies did so in the past, how they could in the future, and how to prevent it this time.
Responding departments have history to draw upon. A study titled “Cash to Spend: IPO Wealth and House Prices” analyzed the impact of IPOs in California between 1993 and 2017. It found that average home prices within 10 miles of the company’s headquarters rose one percent after the filing date and another .8 percent after the company went public, compared to the rest of the county.
For what it’s worth, stock value tends to flatten after the IPO buzz but investors will be giddy nonetheless. Another notable difference is that the tech companies and their employees looking to go public this year are based in San Francisco, not spread out in the Bay Area like Facebook and Google.
“We’ve seen its impacts — not just on our affordable housing crisis, but on traffic congestion, our transportation infrastructure, our public goods and services, and the health and well-being of the people and communities who call this City home,” Mar said. “We have a moral responsibility to stand up in the face of growing wealth inequality, and demand that the forces fueling these disparities pay their fair share for mitigating them.”