Data specialist Snowflake flew higher on its stock market debut in New York. The unexpected backing of super investor Warren Buffett added a golden edge.
A revolution in data management is what Snowflake predicts. The company enables lightning-fast and precise data analysis without the need for massive computing power or storage space. A premise that investors consider worth $ 33 billion. Snowflake doubled on its initial public offering on Nasdaq on Wednesday as the stock opened at $ 145. On Monday, the price range was increased from 75-85 to 100-110 dollars, but that also turned out to be too modest. The introductory price was eventually set at $ 120, a high bar that Snowflake jumps smoothly. After a volatile session, the stock closed more than 111 percent higher at $ 253.93.
Snowflake, led by the Dutch American Frank Slootman, will release 28 million new shares. With that, the company raises $ 3.8 billion and signs for the largest IPO in the US this year after pharma financier Royalty Pharma and Spac, a new investment vehicle of leveraged fund manager Bill Ackman.
Snowflake’s debut is one of the busiest financial events this year. The surprising entry Warren Buffett sparked investor appetite. The tech-shy super investor announced last week that his investment fund Berkshire Hathaway
subscribes to Snowflake at the IPO for USD 570 million. Also the business software group Salesforce
subscribes for 250 million dollars in the new shares. Salesforce already subscribed to Snowflake in a private capital round in February. A decision that the company has not yet complained about. Snowflake was valued at $ 12 billion at the time and is worth triple that barely 6 months later.
Investors have been drawn to the company’s rapid growth. Snowflake was able to increase its turnover by 174 percent to 242 million euros last year. To finance its rapid growth, the company has to incur high costs. It closed the books last year with a net loss of 349 million euros.
Run on tech stocks
Since the corona crisis, there has been a run on technology stocks as investors see those companies as corona proof. Where companies in the old economy are suffering from the pandemic and see their revenues drop sharply due to shoppers in store, tech companies are benefiting from the virus. It is the tech players that keep the new economy going, that of e-commerce and massive home working.
In addition, the low interest rate also plays a role. This means that the current value of future profits is valued much higher than in a climate of high interest rates. This is beneficial for technology companies, because the lion’s share of the profits of technology companies lie in the future due to their high growth profile. As a result, those companies are becoming increasingly valuable in the valuation models of analysts and other investors.
Due to the boom in the technology market, the Nasdaq technology exchange peaked at 12,056 points at the beginning of this month, a price jump of 34 percent since the beginning of 2020. In recent weeks, the Nasdaq has had to lose some because investors doubted the high valuations of tech companies, but the indicator still stands at an annual profit of about 25 percent.