As real estate markets flail nationwide due to overstocks of foreclosed properties and a stagnant construction industry, the one place in the country that is seemingly immune to the deadbeat housing market is none other than Silicon Valley, CNN Money reports. “We live in an alternate universe here,” says Valley-based Real estate broker Michael Dreyfuss, who is currently fielding offers near $3 million for a 7,500 square foot Palo Alto abode listed at $1.9 million in April. Trends in the Nor-Cal housing market may be indicative of the same economic invulnerability many of its young businesses seem to be exuding.
Companies such as Pandora (NYSE:P) and LinkedIn (NYSE:LNKD), recent IPO breadwinners, are trading on multi-billion dollar valuations with no profits to back them. LinkedIn, for example, currently trades at 750 times its forward 2012 earnings. Adding to the fervor will be forthcoming IPOs from Zynga (valued at $15-20 billion), Groupon (valued at $20-30 billion), LivingSocial (NASDAQ:AMZN) (valued at $10-15 billion) and Facebook (valued north of $80 billion), yet some of the Valley’s biggest names, such as former Netscape founder and current Venture Capital Investor Marc Andreessen, continue to scoff at the current bubble talk. CNN reports that this year will see most tech IPOs (over 50) since the year 2000, when the first tech bubble popped.
Finally, chinks in the steel plated armor of Silicon Valley’s insouciance are beginning to emerge, with several local VCs publicly griping about their concerns with the current market. Says one anonymous early investor in 12 recent tech IPOs, “The valuations are very high and discount too much risk. Too much late-stage money is flowing in — and much of it from other dotcoms, which have lots of their own investment money coming in, so it’s circular…the analogies to the last bubble are unavoidable.”
Check Out: Bubble or Not? A Look at This Year’s Tech IPOs.
We’ll see if other big names in the valley start to slip up with bubble references in their statements, but for now heed CNN’s hint that Cali tech stars are exhibiting a bit of bubble denial. “No bubble announces itself. The sun dazzles right now — but does it beckon brilliance or portend darkness? A sure sign of budding bubbliness is the rush to find alternative metaphors. Read the blogs, attend the tech conferences, sit at a Starbucks (NASDAQ:SBUX) for an hour in Sunnyvale some afternoon — you’ll hear most of them. There’s a wave — ride its crest, but don’t get inundated! There’s froth and ferment. There’s a rush and a gush. Our favorite, from a well-known investor: ‘The cuckoos have come out of the clock!'”