Cash to spend: IPO wealth and house prices

Abstract This study demonstrates the impact of initial public offerings (IPOs) on local house prices. Applying spatial difference‐in‐differences methods to IPOs in California from 1993 to 2017, we find house prices increase by 0.7%–0.9% near an IPO firm's headquarters around filing and issuing dates. Upon lockup expiration, price changes depend on postissuance returns. Treating the San Francisco Bay as a commuting barrier, we identify sustained price increases after filings and temporary increases after issuing and lockup expiration. We also confirm post‐IPO price divergence between the treatment and synthetic control areas. Our findings indicate the effect of liquid wealth under mild financial constraints.