Interest in Snowflake surges, IPO share price hits $120
We examine how the details behind Snowflake’s initial public offering have changed over the last week, including its most recent valuation.
Snowflake IPO: all eyes on Wednesday’s mammoth listing
With every passing day, the hype around the Snowflake IPO seems to grow larger.
In what represented a mere placeholder, the company in August said it was seeking to raise $100 million. At that point an IPO price target hadn’t been set and Warren Buffett’s inclusion likely seemed an absurd fantasy; but, hype behind the stock was still high.
There was good reason for all of this, mind you: besides the buzzword’s surrounding Snowflake, including its focus on ‘cloud data storage’ or its status as a solution as a service (SAAS) company – the company boasts rapid growth and a number of other impressive metrics, including:
- Q2 revenue growth of 121%;
- A net retention rate of 158%; and
- 3,117 customers, 56 of which contribute over $1 million in revenue
Framed against those kind of figures, the assumption always seemed to be that Snowflake was going to raise a lot and at a high price.
Such a theory was proven correct when the company released its updated prospectus last Wednesday. Here the company revealed it was looking to raise as much as $2.73 billion – offering its shares at an IPO price of between $75 to $85 per share.
Snowflake would later revise that price target range up to between $100 to $110 per share.
The Warren Buffett factor, Berkshire and Salesforce share prices to be closely watched
While much of the above discussion points are not wholly surprising, what was surprising was the revelation that Warren Buffett – who has historically steered clear of IPOs and tech more generally – through his holding company Berkshire Hathaway, would be participating in the IPO.
Centrally, as part of the updated prospectus, Snowflake revealed that Berkshire Hathaway would be purchasing some 3.25 million Snowflake shares at the IPO price; as well as an additional 4 million shares from one of Snowflake’s stockholders, as part of a secondary transaction.
YTD the Berkshire Hathaway (class B) share price is down 4%, last trading at $218 per share.
As part of that updated prospectus, it was also revealed that Salesforce’s venture capital arm – Salesforce Ventures – would be taking a $250 million stake in the company, also purchased at the IPO price. Salesforce previously invested in Snowflake in February as part of a series G round, which at the time, saw Snowflake privately valued at $12.4 billion.
YTD the Salesforce share price is up 50%, last trading at $251 per share.
Further developments emerge
The Snowflake story twisted a little more on Tuesday, with Bloomberg reporting that the ‘California-based company sold 28 million shares Tuesday for $120 apiece,’ representing a further upwards revision of the Snowflake IPO share price and implying a staggering market valuation of ~$33 billion.
At this revised price, Warren Buffett’s stake in Snowflake would carry a value of $735 million, according to Barrons.
Elsewhere, speaking to CNBC, stock commentator Jim Cramer said:
‘I think Snowflake’s gonna be a great long-term performer.’
Mr Cramer went on to theorise that ‘I bet it will have a very strong first week, but the price of admission seems a little too extreme to me, unless you can get in on the deal.’
Snowflake is set to be tradable on Wednesday, 16 September (today) under the ticker ‘SNOW’.
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