SNOW Flakes After Record Software IPO

Update (1300ET): After soaring from its post-IPO open at $245 to $319, SNOW has erased all its post-open gains and is back below $245...

*  *  *

The much-hyped IPO of the aptly-named 'Snowflake' is about to make many of America's richest even richer-erer.

It sold 28 million shares Tuesday for $120 apiece, above an already elevated range (SNOW's initial IPO range was $75-85 on Sept 8; then it was bumped to $100-110 on Sept 14). The Snowflake offering is being led by Goldman Sachs Group Inc. and Morgan Stanley.

The $3.36 billion raised listing ranks as the biggest U.S. IPO this year (and biggest software IPO ever), excluding the $4 billion offering by the special purpose acquisition company, or SPAC, backed by billionaire Bill Ackman.

At its IPO price of $120 a share, the cloud-computing company was worth $33.3 billion, more than Twitter and almost tripling the $12.4 billion it was valued at in a February fundraising round... but by the time it opened at a stupendous $245, SNOW is now worth over $60 billion - bigger than Dell, VMWare, FedEX, CME Group, and bigger than 2 Twitters.

After opening, it shot up to $$319... after being briefly halted!

As a reminder, SNOW now trades at a market cap larger than 400 of the S&P 500 companies.

And who is benefiting from this extreme surge in price?

As Bloomberg reports, Iconiq Capital - a multifamily office whose clients include Facebook’s Mark Zuckerberg, LinkedIn’s Reid Hoffman, and Twitter’s Jack Dorsey - took part in multiple Snowflake funding rounds beginning in 2017. Its 12% stake in the company, purchased for $245 million, is now worth more than $10 billion.

Interestingly, none other than Berkshire Hathaway is buying $250 million of SNOW shares from former CEO Robert Muglia at the IPO price - so already sitting with a massive profit.

Cloud computing “is a secular trend right now,” said Bloomberg Intelligence analyst Mandeep Singh.

We have already seen Zoom, DocuSign and Datadog do well this year. Investors understand the cloud business model well and that makes a high-growth company like Snowflake attractive.”

Snowflake, founded in 2012, is a rare 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. Bloomberg reports that in the fiscal year that ended Jan. 31, Snowflake’s revenue soared 174% to $264.7 million compared with the previous fiscal year, the company reported. In the sixth months that ended July 31, sales were $242 million, a 133% year-over-year increase.

Finally, we can't help but see the irony of a record-setting IPO of a firm called 'Snowflake' as signaling some kind of top in the euphoric millennial-levered rally in stocks since the pandemic trough.