Selling OpenAI house or Anthropic stock is legal. It’s also harder than it sounds.
A growing number of sellers are looking for pre-IPO stock in lieu of cash for their multi-million dollar homes. It might be expected from a real estate agent near Silicon Valley, but reports of listings for sale with shares of Anthropic or OpenAI have been seen in Miami and Brooklyn, as well as more than one residence in the San Francisco Bay Area.
That raises a fundamental question: Can one buy a house with private equity companies to go public soon?
It may be legal, experts say, but there is at least one hurdle that may be impossible to clear.
Read more: Excellent mortgage lenders
A listing discount of $1 million in Anthropic stock
Tech-savvy real estate brokers are eager to acquire pre-IPO stocks in hopes of riding the wave of rapid appreciation.
And with the anticipated Anthropic IPO and OpenAI IPO, investors are eager to get in before the opening bell rings.
One home listed for sale with a $500,000 discount for Anthropic stock is located in Sonoma County wine country. The Healdsburg vacation rental has a list price of $2.5 million, but the owner will receive $2 million in AI company stock.
“The deal is designed for a Bay Area buyer with a large amount of cash sitting in hard-to-use private equity,” the listing said. “Instead of selling the stock and starting a taxable event to finance a second home, that buyer can put the equity directly into a Wine Country property that earns income if it’s not being used personally.”
Tax experts say the explanation may not be entirely accurate.
Jennifer George, chief executive of tax firm PricewaterhouseCoopers, told the San Francisco Chronicle that while a home can be bought for anything, including “cash, a boat, a million chickens,” a buyer using private equity cannot avoid capital gains taxes.
The taxable event is likely to be based on the home’s fair market value, minus the shareholder’s cost basis in the stock, George said.
Read more: What is capital gains tax? Here are some tips to lower your bill.
Stock transfer restrictions can be disruptive
Aside from tax considerations, there’s another potential hurdle to buying a home in OpenAI or Anthropic pre-IPO stock.
Although private companies that want to go public often offer stock buybacks or tender offers that allow employees to sell their stock back to the company or to institutional investors, many of these companies have transfer restrictions that limit who and when the company’s shares can be sold.
The company’s board of directors will have to approve the sale or transfer of shares.
One Bay Area realtor seeking Anthropic stock in the sale of his $8 million home and nearby property is aware of the potential restrictions and is willing to negotiate the rules.
“I wouldn’t pick a fight with Anthropic,” Storm Duncan, an investment banker, told Realtor.com. “I will not try to do something that is not legally acceptable.” Duncan said selling the stock house is a “diversification play,” as he reduces his exposure to real estate while increasing his AI stake.
He already owns about $1 million in Anthropic stock.
Read more: How AI is changing real estate in the US
Another option: borrowing against shares
Buyers of private equity have another option: a loan secured by the private equity as collateral. While it doesn’t accomplish the seller’s goal of acquiring pre-IPO shares, it allows the owner and potential home buyer to retain ownership of the stock while gaining some liquidity — and delaying the sale for taxable capital gains.
Few banks offer loans against private equity, and some companies specialize in such financing. Generally, the loan is not due until the company goes public or is sold.
However, private equity loans are likely to have higher interest rates than loans on publicly traded stocks and have stricter collateral requirements. And again, transfer restrictions may also apply.
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