SpaceX millionaires set to spend on luxury homes, watches, travel

A version of this article originally appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to high-net-worth investors and consumers. become a member to receive future editions straight to your inbox.

SpaceX’s IPO is expected to create thousands of new millionaires and scores of new billionaires. While current and former employees won’t be able to sell their shares immediately, some are already planning how they’ll spend their windfall.

This newfound wealth could create a ripple effect in luxury real estate markets near SpaceX’s office hubs, boosting spending on watches, private jet rentals 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. He said their ages range from mid-30s to early 40s.

“In some cases they can’t seem to believe themselves that they’ll suddenly be able to buy a house for their parents. They’ll have all this discretionary income to do what they really want,” said Bisignano, a partner at Vista Sotheby’s.

SpaceX’s California office is a short drive from the affluent coastal communities of Manhattan Beach, Redondo Beach, Hermosa Beach and Palos Verdes Estates. Bisignano said he expects many SpaceX employees to buy luxury homes in the area. He noted that after the company’s IPO in 2012, there was a similar buying spree in the neighborhoods around Facebook headquarters, with home values ​​there rising 21%.

Bisignano also said he anticipates increased interest in second homes in other beautiful parts of California, such as Mammoth Lakes, Palm Springs and Tahoe.

Texas real estate agent Gary Dolch said SpaceX employees have seen similar interest in the greater Austin area, with SpaceX’s Bastrop campus located about 30 miles from downtown Austin. He said some are planning to buy immediately after taking a margin loan, while others are waiting for the IPO lock-up period to end.

Potential homebuyers’ tastes range widely, Dolch said, from luxury condominiums on Lake Austin or Lake Travis to 1,000-acre farms farther from the city. He added that he is optimistic that the IPO will revive the luxury market in Austin, which has softened in the last three to four years.

“We feel like we’re on the cusp of the next wave in Austin’s expansion fueled by this tech rush,” he said.

Bisignano said the newly rich rarely stop their spending sprees on their dream home. He expects buyers to compete for homes with four-car garages to fit their new Ferraris.

While sports cars are a popular choice, luxury watches are a more practical status symbol for everyday use.

Paul Altieri, CEO and founder of Bob’s Watches, said the watch is often the first luxury purchase made after a major liquidity event. He said customers often prefer Rolexes because they are instantly recognisable. He added that models such as the Daytona, GMT-Master II and Submariner are the most popular models.

“The watch becomes a reminder of this achievement every time it is worn,” he said. “Stock certificates remain in the brokerage account. The watch is worn on your wrist.”

John Shmerler, CEO of luxury watch and jewelry retailer The 1916 Company, said customers who have been waiting for years are often willing to pay premium prices for second-hand watches from award-winning brands such as Patek Philippe and FP Journe.

The extravagance doesn’t end there. While some SpaceX employees have already flown first class, the IPO will allow many of them to fly private.

DJ Hanlon, Flexjet vice president of sales, and Kolin Jones, founder and CEO of Amalfi Jets, said private jet companies have seen recent inquiries, particularly regarding SpaceX’s IPO.

Jones said customers are already chartering jets to mark the occasion with a trip.

Jones said the best choice to celebrate a liquidity event is Las Vegas, especially for younger travelers traveling without children. Miami and Cabo San Lucas, Mexico are also popular destinations.

However, Jones said those who want to take the whole family on vacation are turning to Aspen, Colorado and Yellowstone National Park. He added that Disney World is a classic choice for local families with young children who want to avoid the hassle of airport security.

When it comes to newly wealthy clients, Jones said Amalfi Jets’ sales team sometimes receives follow-up calls from asset managers asking them to cancel their clients’ contracts or switch to smaller jets.

“It’s funny sometimes to see clients argue with their asset managers, saying, ‘No, it’s my money, I want Gulfstream,'” he said. “There will be a lot of people flying private for the first time, and I think it will be a really fun spending spree.”