Snowflake Soars Into Tech Big Leagues With $70 Billion Value

(Bloomberg) -- Snowflake Inc. soared in a euphoric stock-market debut that transformed the eight-year-old software company into business valued at more than $70 billion.

Snowflake’s $3.36 billion initial public offering is a record for a software company and the biggest in the U.S. this year. Its share price soared as much as 166% Wednesday, minting fortunes inside the company and across Silicon Valley.

Shares of the cloud-data software maker opened at $245 -- more than double its IPO price -- in New York trading. That 104% gain at the opening bell was the third-highest such pop for an IPO of $1 billion or more on a U.S. exchange and the biggest since Florida-based equipment rental company Herc Holdings Inc. went public in 2006.

Snowflake sold 28 million shares at $120 apiece on Tuesday. They were earlier marketed for $100 to $110 each after the range was boosted from $75 to $85.

The shares, which reached as high as $319, closed up 112% to $253.93 in New York trading, giving it a market value approaching six times the $12.4 billion it received in a private funding round in February.

Uber, Dell

That makes Snowflake, previously a lesser-known firm based in San Mateo, California, more valuable than Uber Technologies Inc., Dell Technologies Inc. and General Motors Co., according to data compiled by Bloomberg.

“So far, so good,” Snowflake Chief Executive Officer Frank Slootman said in an interview. “IPOs for us are milestones along the way. They’re not endpoints. We needed to do this for a number of reasons, especially to raise the stature of the company in the marketplace.”

Slootman said that he’s spent a year speaking with institutional investors about backing Snowflake, and now hopes they will maintain large stakes for at least five to 10 years. He wanted shareholders who weren’t just looking for “momentum,” he added.

Comparing an IPO to the switch from college football in the U.S. to the pros, he said, “I sometimes refer to it as we go from playing on Saturday to playing on Sunday.”

MORE: Snowflake IPO Creates Flood of Wealth for Silicon Valley Elite

With IPOs roaring back after a spring lull as the coronavirus pandemic hit the U.S., Snowflake’s listing is this year’s largest on a U.S. exchange by an operating company, according to data compiled by Bloomberg. That excludes the $4 billion raised in July by a special purpose acquisition company, or SPAC, backed by billionaire investor Bill Ackman.

U.S. IPOs are having a busy week as 21 companies are expected to price their offerings raising more than $10 billion combined, according to the data.

JFrog Jumps

JFrog Ltd., which makes tools for software developers, closed up 47% to $64.79 after jumping as much as 75% in its trading debut Wednesday following a $509 million offering. Also on Wednesday, Unity Software Inc. elevated the price target to raise as much as $1.2 billion its IPO set for Thursday.

Snowflake’s IPO attracted Warren Buffett for a rare investment. Berkshire Hathaway Inc. and Salesforce Ventures, an arm of Salesforce.com Inc., have each committed to buy $250 million of the company’s Class A common stock in a private placement. Berkshire also agreed to buy 4 million shares in a secondary transaction, according to Snowflake’s filing.

Founded in 2012, Snowflake is a challenger to Amazon.com Inc. as a provider of data warehouse technology, which compiles information from different systems so clients can analyze it together in the same place. In the fiscal year that ended Jan. 31, Snowflake’s revenue soared 174% to $264.7 million compared with the previous year, the company reported. In the sixth months ended July 31, the company lost $171 million on revenue of $242 million.

Data ‘Exploding’

“Data is exploding,” said Carl Eschenbach, a partner at Snowflake investor Sequoia who’s also on the software company’s board. “There is no centralized data cloud other than Snowflake that can combine all of that data and give you the business insights you want in a very fast way.”

Eschenbach added, “We are still in the early innings of companies moving their data to the cloud.”

Daniel Elman, an analyst at Nucleus Research, said Snowflake’s IPO surge is a culmination of the broader success of cloud-based companies.

“Momentum has been building where cloud has gone from a proof of concept or for things that were less critical to companies realizing it will enable a much more agile and modern architecture and working style,” Elman said in an interview.

Snowflake’s offering was led by Goldman Sachs Group Inc. and Morgan Stanley. The company’s shares are trading on the New York Stock Exchange under the symbol SNOW.

(Updates with CEO’s comments in seventh paragraph)

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