Snowflake Raised A Record $3.36 Billion in IPO

In a rare feat, a United States (US) based cloud data platform, Snowflake Inc. or Snowflake raised over $3 billion in its impressive Initial Public Offering (IPO) on Wednesday, September 16, 2020. This IPO represents the biggest US-listing of the year amid the uncertainties of the global market, impacted by the COVID-19 outbreak.

According to Refinitiv, among US-listed companies with a market capitalization of at least $10 billion, only three companies are now more expensive than Snowflake’s 2020 revenue multiple. Those companies are Nikola Corp, Liberty Broadband, and Immunomedics Inc. The market debut of Snowflake, founded in 2012 in San Francisco, reflects that the low-interest rates drive investors into equities.

Such a remarkable opening in the public listing for Snowflake was made possible under the leadership of the present Chief Executive Frank Slootman and CFO Mike Scarpelli, who already had prior experience of the listing. Both the executive members were hired last year to help Snowflake get ready for an IPO.

Biggest US-listed IPO

In the Wednesday debut, Snowflake sold 28 million shares in its IPO to raise $3.36 billion in an impressive software public listing of all time. Prior to the listing, Warren Buffett’s Berkshire Hathaway Inc. and Salesforce Ventures LLC had entered an agreement with Snowflake to acquire shares worth $250 million for each.

With this recent IPO, Snowflake witnessed a surge of more than double its share price when it was listed in New York Stock Exchange debut. According to Reuters, “Snowflake shares started trading at $245 apiece on Wednesday, more than double its $120 IPO price, and closed up 111% at $253.93 to value it at over $70 billion.”

“This is just one day. Things will normalize and shake out and become more settled as time moves on,” Snowflake CEO Slootman said in an interview. However, analysts suggested that investors overlooked the losses incurred by the company.

Facing Net Losses

Investors seemed to be looking at the prospect of the company’s future operation since the cloud sharing business is likely to pervade in all spheres as many offices and firms across the globe are expanding their remote working system. As per Reuters, “Snowflake’s full-year revenue for the period ended Jan. 31 jumped 173.9% to $264.7 million, though its net loss nearly doubled to $348.54 million.”

Reflecting the debate about the challenges in the IPO process, Slootman said, “The idea that we could have sold all 28 million shares at the highest price we’ve seen today is complete and utter nonsense. Markets don’t work that way.” He further added, “That’s why this whole DL (direct listing) narrative and all the noise around it is incredibly misguided. What an IPO process does, it discovers the price at which you can move your entire offering. And of course, that’s a much lower number than the number at which you can move 100 shares.”

Snowflake’s impressive listing shows that the investors are constantly looking for massive investment and there are vast opportunities for the US capital market despite the threats posed by the ongoing coronavirus pandemic.