Snowflake Pops in ‘Largest Ever’ Software IPO
Snowflake’s stock more than doubled today during its initial public offering, and the volatility was so great that stock market officials briefly halted trading in what the mainstream press is calling the largest ever IPO for a software company.
The fact that Snowflake is not a software company but a cloud services company would seem to make little difference to investors who racked up a big gains with the new equity, which trades on the New York Stock Exchange under the symbol SNOW.
The San Mateo, California-based company elected to price its stock debut at $120 per share, which was significantly higher than the $75 to $85 per share range that it proposed last week, according to a story on CNBC. The company planned to sell 28 million shares priced at $120 apiece, raising $3.4 billion and valuing it at over $33 billion.
When shares actually started trading this morning, SNOW was offered at $245, more than double the original offering price. The stock quickly surged to over $300 per share, and seesawed a bit, causing NYSE officials to briefly halt trading. Toward the end of the trading session, it settled down in the $250 range.
At $245 per share, the company was worth nearly $68 billion, considerably larger than the $12.4 billion valuation Snowflake had earlier this year. The valuation doesn’t reflect the company’s current earnings ($418 million in revenue over the past four quarters, according to its S-1 form) but more the rapid growth that the company is experiencing. It doubled the size of its customer base, from 1,550 in July 2019 to 3,100 in July 2020. Investors clearly see the potential for even faster growth in the months and years to come.
Frank Slootman, who took over as Snowflake’s CEO last year after Bob Muglia’s departure, downplayed any irrational exuberance that might be exhibited over the IPO. “A stock is worth exactly what somebody wants to pay for it,” Slootman told CNBC before trading started today. “It’s like talking about the weather. It is what it is.”
Snowflake is riding the general surge in cloud computing that has become an avalanche under the COVID-19 lockdown. With its ability to run on all three public clouds, Snowflake is seen by some as a better place to warehouse business data than the RedShift, Synapse Analytics, and BigQuery offerings from Amazon Web Services, Microsoft Azure, and Google Cloud, respectively.
The company’s successful IPO was heralded by its ecosystem partners as a validation of the cloud model and Snowflake’s approach to democratizing access to complex big data tech.
“Snowflake’s IPO marks a turning point for cloud and data technology,” said Sean Knapp, the founder and CEO of Ascend.io, which automates data engineering. “While we’ve seen a handful of other cloud-native data platforms such as Datadog and Sumo Logic demonstrate incredible growth, none have done so as remarkably as Snowflake.” (Sumo Logic’s IPO is tomorrow, by the way.)
“With its historic IPO, Snowflake has created a new standard for what a SaaS company can achieve, as well as set the bar for future startups and their trajectory to fundraising, valuation, and business growth,” said Rick Farnell, CEO of Protegrity, a data security solutions provider. “While the concept of the data warehouse is not new, Snowflake’s success is in simplifying the set-up, use, and management of a data warehouse built from the ground up, specifically for modern cloud environments.”
“Snowflake took the cloud playbook, rewrote it and won,” said Poojan Kumar, CEO and co-founder of Clumio, a provider of enterprise backup offerings. “The company is a prime example of how a modern, forward-thinking organization, built from the cloud up, should evolve.”
“We’re excited for Snowflake’s IPO,” said Raj Verma, the co-CEO of MemSQL, a NewSQL database vendor. “This an exhilarating time for the database industry. As this IPO demonstrates, if a company has great technology and executes well, good things happen. More importantly, this development underscores a significant change in thinking about the increasing importance of the database market. Data has never been more important than it is right now.”
“Snowflake empowers enterprises to easily and quickly compete with data,” said Matthew Scullion, the CEO and co-founder of Matillion, a data integration provider. “Their cloud-native architecture and ability to deliver accelerated time to value at scale and volume, across any use case, has driven their incredible growth.”
Last week, Snowflake announced that Salesforce and Berkshire Hathaway would each buy $250 million in Snowflake stock in a private placement following the IPO.