Two years ago, San Francisco offered a payroll-tax break to keep Twitter Inc., then with 400 employees, from moving its headquarters out of town. The gamble has since paid off, spurring other technology companies to choose the city as their base and boosting the local economy.
The social-media company, now with 2,000 workers, is seeking to raise $1 billion in an initial public offering of shares, people with knowledge of the matter have said. The move is likely to create more millionaires, jobs and technology investment in California’s fourth-largest city, while driving up housing prices that will force some residents to move out.
“You’re going to have a lot of people who are made wealthy when Twitter goes public and, presuming the stock price continues to go up, who are going to have resources to invest in another generation of technology startups,” Ted Egan, chief economist in the San Francisco controller’s office, said in a telephone interview.
The most-anticipated technology-company IPO since Menlo Park-based Facebook Inc. is part of a surge in technology companies moving to and opening in San Francisco that drove down unemployment to 5.6 percent in August from 9.7 percent three years earlier. The development has also pushed up commercial and residential rents and aided a revival of a blighted downtown neighborhood.
Karen Wickre, a Twitter spokeswoman, declined to comment on the effect the offering will have on the city’s economy, citing a regulatory quiet period before the IPO.
‘Hyper Gentrification’
“Housing is totally out-of-control expensive now and the kind of hyper gentrification of San Francisco is gathering steam,” said Gabriel Metcalf, executive director of the San Francisco Planning and Urban Research Association, better known as SPUR, a nonpartisan urban policy organization.
“That’s because the size of the employment boom relative to the size of the housing stock is out of whack, coupled with decades of making it difficult to build housing,” Metcalf said.
“The IPO itself won’t literally just by itself change housing costs, but it’s part of this bigger wave of demand for housing that’s really made costs out of sight,” Metcalf said.
San Francisco packs a population of more than 800,000 onto the tip of a peninsula. The city is just seven miles (11 kilometers) long and seven miles wide. At about 18,000 people per square mile, it’s the most densely settled major U.S. city behind New York.