Snowflake’s Record Debut Raises Questions About the IPO Model
A Bloomberg Team Was Amused and Confused by Snowflake’s Record IPO
(Bloomberg Businessweek) -- Cloud software company Snowflake Inc. had its initial public offering at $120 a share and on Sept. 16 promptly shot above $300. It’s now trading at about $235. Here’s a peek at how Bloomberg’s editors and reporters responded to the news.
● Pat Regnier, New York, Finance editor, Bloomberg Businessweek
Let’s talk about Snowflake. I managed to get blissfully through my life until Monday not knowing this company existed, and now—boom—biggest-ever software IPO. That’s a tactically embarrassing admission: It feels like there’s a lot of this going around these days. There’s so much froth in so many parts of the market—giant new things keep emerging out of investors’ peripheral vision. While you were trying to get your head around the fad for blank-check companies, the boom in call options, and hedge funds tracking the chatter on Reddit, Snowflake investors including Jack Dorsey and Warren Buffett were quietly working out ways to make money on a company with zero consumer footprint that competes with businesses such as Amazon.com—which you were told could justify their high valuations because they were near-monopolies. And IPOs are suddenly hotter than ever after looking like they might be challenged by blank checks and direct listings as the way to go public.
● Sonali Basak, New York, Wall Street reporter
The pricing—the company got $120 a share when investors in the market were clearly willing to pay much more—did bring to mind the persistent Silicon Valley complaint that the IPO model is broken.
● Crystal Tse, New York, Deals reporter
That’s definitely a common complaint. But even at the IPO price, Snowflake’s valuation relative to expected forward sales actually is very high. So one can argue that the initial pricing was correct but the market is ahead of itself.
● Sarah Ponczek, New York, Markets reporter
Not a main point, but I was also thinking about how we all just spent all this time fretting about what it would look like if Tesla Inc. was in the S&P 500. Well, Snowflake isn’t even in the Nasdaq 100 index—and a $70 billion valuation would place it in the top third of companies in the Nasdaq. Which is quite crazy considering Pat definitely wasn’t alone in never hearing of it.
● Nico Grant, San Francisco, Enterprise technology reporter
Tech giants have never been larger or more powerful, and there’s an assumption in some corners that the winners have been set and only regulation can disrupt that. But smaller ones such as Snowflake can still win by focusing on solving a particular issue—in this case, analyzing data on cloud platforms. Chief Executive Officer Frank Slootman said to me on the day of the IPO: “Industries get attacked from the most unpredictable places. You never see them coming because they’re under the radar.”
● Dina Bass, Seattle, Technology reporter
Folks in Silicon Valley have been on to this one for a bit—which is why you saw Salesforce.com invest in it earlier this year. And last December, adding features to catch up with Snowflake was a big part of Amazon Web Services’ announcements at its annual conference.
● Pat Regnier
Nico, another interesting thing from your interview with Slootman is that the IPO was also good publicity: “We needed to do this for a number of reasons, especially to raise the stature of the company in the marketplace.”
● Crystal Tse
This text convo I had with a friend probably captures the story with retail investors and IPOs right now. Friend: “SNOW. BUY BUY BUY”
Me: “Lol”
Friend: “I don’t know what this company does really except cloud computing. But everyone says it’s free money. And I like free money.”
©2020 Bloomberg L.P.
With assistance from Bloomberg