Initial Public Offerings (IPOs) can be fantastic trading opportunities for on-the-ball investors. While 2019 was a tremendous year for IPOs, with companies like Uber and Lyft going public during that time, they’ve quickly fallen under the wayside for the most part since then. The ongoing pandemic has played a major role in this as well, as few companies are willing to try and go public in such a turbulent time. However, there are always noteworthy exceptions. Wednesday saw a cloud software provider called Snowflake (NASDAQ: SNOW) officially go public, with shares more than doubling in their first day of trading.
As one of the most successful IPOs so far this year, Snowflake’s valuation has shot up substantially in comparison to early this year. Back in February, the cloud platform developer had a $12.4 billion private valuation. As of Wednesday, this has now shot up to $68.0 billion, making it the largest software IPO in American stock market history.
Interestingly enough, it appears that Warren Buffett has invested plenty of money into Snowflake as well. A relatively uncharacteristic move for the legendary value investor, its speculated that some of his close advisors, such as Todd Combs, first pitched the idea to him. If so, it goes to show that Buffett is gradually giving up the reigns slightly to his lieutenants. It’s also likely that he made this bet due to Berkshire Hathaway’s exorbitant cash position, mainly due to a lack of good deals available in the current market climate. Other large companies, like Salesforce, have also invested heavily in this IPO as well.
“Does this put pressure on us? Of course it does,” said Frank Slootman, Snowflake’s chief executive, said about the company’s soaring stock price according to the Wall Street Journal. “It’s a vote of confidence. But clearly as a management group and as an employee base we have to work very hard to deliver on it.”
Although Snowflake, like most tech-based IPOs, still isn’t profitable, the company is projected to see substantial growth in the years to come. The company’s IPO issued out 28 million shares, with Snowflake raising around $3.4 billion in total throughout the proceeding. At the same time, tech stocks in general have done quite well for themselves over the past few months, in spite of the coronavirus pandemic. This fact has likely played a significant role in Snowflake’s IPO success, with many aspiring investors jumping on the opportunity to cash in on this Buffett-approved tech stock.
The demand for cloud-based platform providers is also expected to grow dramatically in the future. There’s already been a strong trend for cloud-based technologies as more companies shift in this direction. However, the coronavirus pandemic and the rise of remote working will likely only further accelerate this trend over the next year or two.
Snowflake Company Profile
Snowflake Inc is a software company. The company provides data cloud platform which helps customers in data engineering, data lake, data warehousing, data science, data applications, and data sharing. Also, the company provides solutions for data silos and data governance. – Warrior Trading News