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Shares in Snowflake doubled on their trading debut on Wednesday after the largest initial public offering for a US software company, in the latest sign of huge Wall Street demand for cloud computing services businesses.
Shares of the Silicon Valley company rose more than 160 percent above the IPO price to touch $ 315, sending the company’s market value to nearly $ 90 billion, based on the number of shares held. circulation, before dropping to $ 235 at lunchtime in New York.
Snowflake raised $ 3.4 billion more than planned by selling 28 million shares for $ 120 each, beating its target range of $ 100 to $ 110, which in turn increased by more than a quarter earlier this week.
The company’s market value on Wednesday reached seven times the valuation of $ 12.4 billion achieved in its most recent fundraising round in February.
When operations began Wednesday, the IPO immediately created a huge, publicly traded company in the cloud software industry that was more than three-quarters the size of IBM and six times the size of Slack, the productivity company. job that was listed last year.
“There is a certain fear of missing out on high-tech stocks and high-tech stocks that will drive valuations and prices,” said Adam Ronthal, research vice president at Gartner.
The offer is the largest of the year and the largest in the US since Uber’s float of $ 8.1 billion in May last year, according to Refinitiv, the data provider. VMware, Dell’s majority-owned cloud computing company, previously completed the largest initial public offering of software in 2007.
Snowflake has attracted investors with a rapidly growing customer base for its data warehousing product, which enables users to analyze data through multiple remote storage providers such as Amazon Web Services.
The company’s revenue grew 121 percent in the second quarter over the same period last year, and it boasts high “net retention” numbers, which measure customer loyalty.
Like many tech startups, Snowflake has spent cash to gain market share, posting a net loss of $ 348.5 million on revenue of $ 264.7 million in its most recent fiscal year.
The IPO gained momentum last week after Berkshire Hathaway and Warren Buffett’s Salesforce agreed to each buy $ 250 million worth of stock in conjunction with the IPO. Berkshire bought an additional $ 320 million from Bob Muglia, the former CEO of the company.
Frank Slootman, the current CEO of Snowflake, previously led technology companies Data Domain and ServiceNow at the time of their IPOs.
Venture capital group Sutter Hill Ventures is poised to reap the greatest rewards from the company’s listing, owning more than 20 percent of its shares prior to the offering.
Snowflake’s list is further evidence of the growing demand for tech companies benefiting from the shift to remote work. The BVP Nasdaq Emerging Cloud Index, which tracks cloud software companies, has gained 60 percent this year, more than double the returns of the broader Nasdaq technology index.
Gartner’s Ronthal said Snowflake could face difficulties defending its market position against larger data storage competitors such as Amazon and Google.
“They have a lot to offer and there is a lot to like on the platform, but those multiples seem a bit over the top to me,” he said.
Snowflake’s IPO comes during a busy week for IPOs, with a dozen companies poised to join the US stock market.
Unity, a video game software company, could raise more than $ 1 billion in an offering by the end of this week, while Sumo Logic, another data platform, and JFrog, an Israeli software development company, are also planning. quotes.
The Snowflake deal dwarfs two listings in June that were previously the biggest this year: Royalty Pharma, which raised $ 2.5 billion, and Warner Music, with $ 2.2 billion.
Recent activity has pushed the amount raised in 2020 to the highest levels since 2014 so far this year, according to Refinitiv. In that year, Alibaba’s $ 25 billion float set the record for the largest in the world.
Goldman Sachs and Morgan Stanley served as primary underwriters in the Snowflake offering.
