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Buffett-backed Snowflakes’ value doubles in the stock market’s biggest software debut

(Reuters) – Snowflake Inc.’s shares more than doubled in their debut on the New York Stock Exchange on Wednesday, a day after Warren Buffett – backed data warehousing company raised more than $ 3 billion in the year’s largest U.S. listing to date.

The company logo for Snowflake Inc. appears on a banner to celebrate the company’s listing on the New York Stock Exchange (NYSE) in New York, USA, on September 16, 2020. REUTERS / Brendan McDermid


7;s spectacular market debut reflects the large appetite for new stocks as low interest rates drive investors to stocks.

The market overlooked Snowflake’s losses and focused on the prospects for its data sharing software business on cloud systems, which has experienced rapid growth as offices around the world adapt to teleworking.

Snowflake shares began trading at $ 245 per share. Wednesday, more than double the $ 120 listing price, closing 111% to $ 253.93 to value it at over $ 70 billion. $.

“This is only a day. Things will normalize and shake out and become more settled as time goes on, ”Snowflake CEO Frank Slootman said in an interview.

Among US listed companies with a market value of at least 10 billion. $ Only three companies are now more expensive than Snowflake’s revenue multiple by 2020. Only Nikola Corp, Liberty Broadband and Immunomedics Inc, according to Refinitiv.

Snowflake sold 28 million shares in its IPO to raise $ 3.36 billion in the largest software IPO ever.

For such a large IPO, an opening pop of this size is rare. The stunning debut makes CEO Slootman and CFO Mike Scarpelli billionaires, even though neither of them founded the company.

It is likely to revive the debate among venture capitalists, including Benchmark’s Bill Gurley, who claims that investment banks underestimate IPOs so their investor clients can score big gains when the stock starts trading.

Gurley has recommended that companies consider going public through a direct listing rather than an IPO, where the initial share price is determined by orders entering the exchange.

Slootman said he does not regret how the company’s IPO went.

“The idea that we could have sold all 28 million shares at the highest price we have seen today is complete and nonsense. Markets do not work that way, ”Slootman said.

“Therefore, this whole DL (direct listing) narrative and all the noise around it is incredibly misleading. What an IPO process does is it discovers the price at which you can move your entire offer. And that, of course, is a much lower number than the number you can move 100 shares with. ”

About 36 million shares changed hands on Wednesday.

Slootman, who has previously taken two other companies publicly, and Scarpelli were both hired last year to help Snowflake get ready for a IPO.

Prior to the IPO, Buffett’s Berkshire Hathaway Inc and Salesforce Ventures LLC had each agreed to buy $ 250 million worth of shares in Snowflake.

Founded in 2012 in San Francisco, Snowflake sells a cloud data platform that promises to consolidate a company’s data on one platform.

Snowflake’s total annual revenue for the period ended Jan. 31 jumped 173.9% to $ 264.7 million, though its net loss nearly doubled to $ 348.54 million.

The listing comes amid a massive recovery in the US capital markets following a recovery in demand for new listings, after the COVID-19 pandemic caused many companies to postpone plans to be listed.

Reporting by C. Nivedita in Bengaluru and Joshua Franklin in Boston; Additional reporting by Niket Nishant; Writing by Anirban Sen and Joshua Franklin; Editing Arun Koyyur and Lincoln Feast.

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