SAN FRANCISCO – Two years ago, San Francisco offered a payroll-tax break to keep Twitter, 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 Californias fourth-largest city, while driving up housing prices that will force some residents to move out.
Youre 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 controllers office, said in a telephone interview.
The most-anticipated technology-company IPO since Menlo Park-based Facebook 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 citys economy, citing a regulatory quiet period before the IPO.
Based on a regulatory filing Thursday, Twitter set a price range of $17 to $20 per share for IPO and could raise as much as $1.6 billion in the process.
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.
Thats 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 wont literally just by itself change housing costs, but its part of this bigger wave of demand for housing thats 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 long and seven miles wide. At about 18,000 people per square mile, its the most densely settled major U.S. city behind New York.
The median home price jumped 18 percent to $825,000 in August from $700,000 a year earlier, according to DataQuick, a real-estate data provider in San Diego.
The median for existing condos soared to $810,000 from $630,000 in August 2010, while existing single-family detached homes rose to $870,000 from $688,000.
Theres nothing available, so housing prices go through the roof, said Egan, the citys economist. Theres been a very robust amount of housing construction, but it has not yet had the effect of denting the growth in housing prices.
Twitter in 2011 considered leaving San Francisco, telling Mayor Ed Lee in a meeting that a city tax based on the size of the companys payroll would erode its growth. Months later, San Francisco had exempted Twitter from the payroll tax and made the same offer to other companies willing to relocate to Central Market, an area plagued by crime and empty storefronts within blocks of City Hall. Twitter moved into a renovated 1930s furniture mart there in June 2012.
The company is in talks to lease a 320,000-square-foot office adjacent to its headquarters, according to people with knowledge of the discussions. That would more than double the companys current footprint of 295,000 square feet, data from broker CBRE Group show.
Other companies have since followed Twitters example. Since April 2011, 15 technology companies have located in the Central Market area, including mobile-payment service Square Inc. and online retailer One Kings Lane Inc., according to Todd Rufo, director of the citys Office of Economic and Workforce Development.
Theyve single-handedly helped revive a depressed area of San Francisco by moving their headquarters to Mid-Market, Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the Haas School of Business at the University of California, Berkeley, said of Twitter.
So the IPO will provide money for their corporate growth, allowing them to add staff, Rosen said.