Finding housing in San Francisco, the country’s most expensive housing market, can be a nightmare. Finding a buyer willing to part ways with unreleased AI stock might be even harder.
In April, Storm Duncan took a direct approach to reaching tech workers and posted his $8 million Marin County property on LinkedIn, offering an exchange for Anthropic stock. While LinkedIn may not be the most conventional real estate marketplace, it did provide a direct line to Anthropic employees.
The sale includes a 4,372-sqft house and an 11-acre parcel next door. The property sits on top of a hill offering 360-degree views of the city and Mount Hamilton across the bay. Duncan, founder of the tech investment bank Ignatious, splits his time between Jackson, Wyo. and Miami. He’s owned the California property since 2019 and currently rents it out to a venture capitalist.
Anthropic employees “don’t really have liquidity with their shares to sell it,” Duncan told Fortune. “You’re an Anthropic employee, you’re worth 50 or 100 million bucks, but you’re making $300,000 a year, like you can’t buy a house in San Francisco. And you certainly can’t buy one that’s befitting of your net worth.” The employee would still keep some of the upside, he shared.
Duncan joins a few other realtors in the area willing to accept the lucrative AI companies’ stocks in lieu of liquid cash. But just because the seller agreed to a sale doesn’t necessarily mean the two companies in question do. Both OpenAI and Anthropic will need to approve any transaction involving stock transfers, according to the companies’ policies. More so, some financial planners and experts warn parting ways with something potentially so valuable may in fact hurt employees in the long term, trading a potential high return for a physical asset that likely will not appreciate as much in value.
A potential for a new marketplace
Duncan already owns Anthropic stock but said the stock is much more illusive than other frontier AI companies not yet on the market. He sees Anthropic’s focus on corporate enterprise as especially valuable compared to OpenAI’s more general public-facing approach. His choice of Anthropic stock comes from his own personal experience with the company’s executives and its products.
“My bank is a Claude-based bank, so we’ve been using it extensively, and we’ve seen the value it has to us, both in terms of reducing our costs to success, reducing our time to success, and then increasing our probability of success, which is a rare combination,” Duncan said. He also previously worked with Airbnb, where Anthropic CFO Krishna Rao worked for years.
Duncan took down the listing after it went viral, drawing the attention of Anthropic employees and many others. But he said the interest has been strong.
“I think if I wanted to execute a transaction I could,” he said.
Duncan is not the only Bay Area homeowner to accept frontier AI stock in exchange for a home.
Last week, a listing for a $2,995,000 home in San Francisco offered music to some lucky tech workers’ ears. “Anthropic or OpenAI stock will be considered as payments,” read the listing.
The idea came to the home’s listing agent, Rachel Swann, after meeting OpenAI and Anthropic employees at open houses in the area, where many would tell her they wished they could use their paper wealth to buy or rent a house instead of having to wait until their vesting period was over. Why not accept the restricted stock units instead of cash, Swann asked, and the seller, a developer who owns lots of commercial real estate across the state, agreed.
“The seller, he loves those two companies, he thinks they’re a big part of the future of San Francisco,” Swann told Fortune. “He’s like, ‘I’d be happy to hold stock with them and see if that opens up a pathway for people to be able to buy in San Francisco,’ and I think it’s really, you know, resonated with people.” Open houses have been jam-packed, she said.
Swann’s comments echoed Duncan’s assessment that exchanging stock is a way for asset-rich tech workers who struggle to find housing to leverage their paper wealth. Exchanging stock may seem unorthodox, but more nontraditional methods of buying a house are increasingly becoming available. In March, Fannie Mae announced they would allow buyers to pledge their crypto holdings when getting a mortgage, instead of using cash for a down-payment. In 2021, an estimated 3.4 million households used alternative financing arrangements, where the buyer pays the seller directly. These arrangements were mostly for low-cost homes, rural properties, manufactured homes, and units in multifamily buildings, according to the Pew.
Below it, a 1,475-square-foot residence, originally listed for almost $2 million, recently closed at $3 million thanks to a high level of interest. Now, Swann says the top unit is the “by far the more superior of the two.”
The sale price is typical of the San Francisco housing market where bidding wars often lead to offers of millions more than the asking price in a city with a limited supply of single-family homes. Just 26 new single-family homes were added last year, according to the city’s Planning Department.
The asset rich, cash strapped homebuyers
Buying a house with shares from companies that aren’t even on the stock market yet may be unconventional, but reflects the tight Bay Area housing market. A recent Redfin report found that the median home sale price in the San Francisco metro area in April was $1.7 million, an increase of more than 10% from a year earlier. Since the launch of ChatGPT’s first model in Nov. 2022, luxury home prices in the Bay Area—properities valued between $3.1 and $7.6 million—have jumped 13.4%, according to Redfin.
The problem isn’t just the lack of homes for sale, it’s also the lack of rentals, Swann said. San Francisco rental prices have been “accelerating” according to the city’s Office of the Controller. Price hikes have largely been driven by an AI hiring boom putting pressure on limited inventory.
Accepting stock instead of cash for a house could be a solution for hard-pressed tech workers, who typically have to wait four to five years before they can vest. OpenAI pays employees an average of $1.5 million in stock-based compensation, according to the Wall Street Journal. Research scientists’ stock grants can range between $2 million and $4 million at a Series D startup, Tim Tully, a partner at Menlo Ventures, told Fortune last year. While they can’t cash out paper wealth, buying a home with stock is a novel way to actualize their real value.
After Anthropic raised $65 billion at a $965 billion valuation last week, and then confidentially filed S-1 draft to the Securities and Exchange Commission on Monday, using company stock in exchange for housing has likely only perked more employees’ ears.
Swann has spoken to a financial advisor and a securities lawyer about how to structure the deal. She said multiple advisors told her any deal will need board approval before transferring stock before an IPO. An Anthropic spokesperson reiterated the company’s transfer restrictions, which say that all stock sales or transfers not approved by the board of directors are void. OpenAI did not immediately respond to Fortune’s request for comment on if they would approve a sale, but the company also requires written consent for any transfer.
The deadline for offers is set for this week, Swann said.
“Maybe it works out, and maybe it doesn’t, but I think what it’s really doing is opening people’s eyes to how you can be more creative in some of these transactions, and how you can be more creative when people have restricted stock units.”
Trading company equity for physical property
Cynthia Meyer, a certified financial planner and a founder of real estate investment advice firm Real Life Planning, agrees that both sides should seek out legal and tax advice.
“I think people are doing this because they want a home in San Francisco, and they see this as a way to get in their home. Now, doing that in conjunction with a mortgage might be a better deal for the buyer than the seller of the property, depending on what happens with these stocks,” Meyer said. “Would you be better just keeping your stock and letting it grow over time, or do you really want to concentrate it in San Francisco area real estate? That’s a personal decision.”
The number of employees eligible to even potentially transfer their stock is limited by employees who have vested stock, which takes five years at Anthropic and four years at OpenAI to fully vest. The timing of a potential sale matters, too, especially as OpenAI and Anthropic prepared for IPOs.
“A lot of times if somebody is an employee of a company that is going public for the first time, their stock may not be tradable right away,” Meyer explained, adding that the standard lockup period is six months.
There’s also the question of valuation. Both Anthropic and OpenAI have nearly $1 trillion valuations, but that’s all subject to change when the companies likely hit the market later this year. In the near future, Meyer said it’s likely sellers would use the current valuation to decide how much an employee’s shares are worth. The sale will likely be subject to capital gains taxes, which should be a consideration for the seller, as well, she said.
“[The employee] might try and negotiate for [the stock] being worth more than it would be worth for tax purposes,” Meyer said. “In reality, this is a really difficult transaction to do, because it’s still a transaction, like it has taxes on all sides,” Meyer explained.
