Snowflake IPO Cleans Up on NYSE

By | Managed Services News

Sep 16

The cloud vendor minted three new billionaires, doubled its expected market cap and achieved a new Wall Street ranking.

After a “flurry” of first-day trading on Wednesday, the much-anticipated Snowflake IPO now ranks as the largest ever in the software world.

The cloud data warehousing vendor’s New York Stock Exchange debut proved volatile and fascinating. Late Tuesday, California-based Snowflake planned to open at $120, 50% higher than the midrange of its original proposal. Instead, trading kicked off at $245; that was more than double the expected amount. Shares reached a peak of $319 before jumping up and down throughout the day, finally landing at $253.93 at the closing bell.

All in all, Snowflake sold 28 million shares and came out of Wednesday’s trading with about a $73 billion market cap.

Analysts had been projecting a $33 billion-$34 billion market cap.

As CNN Business pointed out before Snowflake’s IPO soared into the stratosphere, a $33 billion market cap would make the cloud vendor worth more than Bank of New York Mellon, Hershey, Allstate, Walgreens and Travelers. At the $73 billion mark, Bloomberg said Snowflake now is more valuable than Dell Technologies or General Motors. And the company was only founded in 2012.

Not only did the Snowflake IPO outdo all others so far in the software industry, it also stands out as the second-largest in 2020, after Pershing Square’s Tontine Holdings. That IPO raised $4 billion.

And three key Snowflake investors surely aren’t complaining. CEO Frank Slootman, ex-CEO Bob Muglia, and cofounder and CTO Benoit Dageville all are now billionaires, as Forbes noted.

Investors Get Rich

They aren’t the only investors who came out strong on the Snowflake IPO. Salesforce and Berkshire Hathaway did, too. Snowflake said in a Securities and Exchange Commission filing last week that each of those giants has committed to buying $250 million in Snowflake stock. Berkshire also intended to buy 4 million more shares from Snowflake’s former CEO in a private transaction, according to The Motley Fool. The Warren Buffett-backed company was to pay the IPO price. That promised to bring Buffett’s total Snowflake investment to more than $500 million.

Legendary investor Buffett did better than expected, however. CNBC reported at 1 p.m. Eastern on Wednesday that Buffett made about $1 billion off of Snowflake. This reflected a philosophical shift on Buffett’s part. As CNBC reported, Buffett hasn’t put money into a newly public U.S. company since 1956, when Ford held its IPO.

Regardless, it’s now up to Snowflake to show investors it can live up to their high hopes. While the company more than doubled its revenue over the past six months (to $242 million), it still posted a net loss of $171 million. That alone makes it an atypical investment for Berkshire Hathaway, which prefers to funnel money into profitable firms. Still, Snowflake’s traction with customers may be one reason why Berkshire took a relatively safe bet. Snowflake recently told the SEC it has more than 3,100 clients, twice the number from a year ago. Of that, 146 qualify as Fortune 500.

The company trades under the symbol “SNOW.”

The company last month filed its intent to go public, hoping to raise $100 million.

It raised …

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