What happened and why Snowflake (+151.34%), the innocently-named cloud computing juggernaut, rang the bell on Wall Street for the first time and came roaring out of the traps with the largest IPO ever for an American software company. In the latest sign of Wall Street’s huge demand for cloud computing services, investors flocked were struck by Snowflake's beauty... 🔕 Pre-bell... Snowflake raised a larger than planned $3.4bn - selling shares at $120 apiece - exceeding its targeted range of $100-$110, which itself jumped by more than a quarter earlier in the week.🔔 Post-bell... The stock jumped 160%+ above the IPO price to touch $315, sending the company’s market value to almost $90bn. Earlier this year, the cloud-guru raised a round of funding which values the business at $12.4bn and seven months on, the company is worth seven-times that. After trading kicked off on Wednesday, the plucky seven-year-old pup was already worth three-quarters that of IBM. 📍 Land grab... As is standard in start-up-dom, Snowflake is burning cash to acquire market share. While revenues jumped +120% in the latest quarter, the company racked up nearly $350 million of losses at the same time. But, like most start-ups, they have a key metric for investors to feast their eyes on - "net retention" - which is riding high and points to a loyal customer base. Big space, big players... Snowflake hardly entered an empty space in the cloud computing world. Unnerved by the presence of big tech, the cloud-newcomer has a rapidly-rising base of customers for its data warehousing product, which allows users to analyse data across various remote storage providers, including Amazon Web Services (AWS). While the cloud is very much 'in-vogue' in a remote-working world, few predicted the type of buyers that Snowflake now has snapping at their stocks... Last week... The IPO received a boost after Warren Buffett’s Berkshire Hathaway and Salesforce agreed to each purchase $250m in stock. Berkshire then purchased an additional $320m from Bob Muglia, the company’s former chief executive. That is so NOT you... Berkshire's investment marks a rare foray by Buffett into the cash-burning and loss-making world of tech startups. If Berkshire goes for tech, it tends to invest more in mature and profitable companies like Apple, which now sits as the Oracle of Omaha's top holding. | The Takeaway Bigger picture...Snowflake’s IPO is further evidence of the investor appetite for tech companies benefiting from the work from home new world. The BVP Nasdaq Emerging Cloud index, which tracks cloud software companies, has gained +60% this year, doubling the returns of the Nasdaq index. Attack is the best form of defence... Snowflake could face a battle defending its bulging market position against the larger data warehousing such as AWS, Google and Microsoft. But Snowflake, the biggest IPO of the year, was a bright enough bulb to get Warren Buffet out of bed and that always has brings lookalike investors along for the ride
