The initial public offering of Warren Buffett-backed Snowflake (SNOW) is about to set a record as the largest U.S. software deal ever as it draws heightened interest from investors. The Snowflake IPO prices late Tuesday and trades Wednesday.
The price range for the Snowflake IPO on Monday was raised about 31%, to $100 to $110 per share. The previous range was $75 to $85, indicating a strong interest in the IPO among institutional investors.
The Snowflake IPO looks to raise $2.9 billion by offering 28 million shares. It will raise more than that if shares price high, as expected. Also, at the midpoint of the revised range, Snowflake will receive a fully diluted market value of $37 billion.
Founded in 2012 and based in San Mateo, Calif., Snowflake is a cloud-based data-warehousing company, providing businesses with an integrated data management system. It provides support for “data engineering, data warehousing, and data science,” according to the Snowflake IPO filing.
Warren Buffett’s Investment In Snowflake IPO
Among the reasons why the Snowflake IPO is receiving plenty of attention is because Buffett’s Berkshire Hathaway (BRKB) is investing a total of $570 million in the offering.
Built into the IPO are commitments from Berkshire Hathaway and Salesforce Ventures to each buy $250 million of Class A common stock in a private placement. Salesforce ventures is the venture capital arm of Salesforce.com (CRM).
Also, Berkshire Hathaway will buy an additional $320 million worth of shares, from an unnamed stakeholder in a secondary transaction.
According to IPO Boutique, an IPO research and advisory firm, the deal is “many multiple times oversubscribed.” That means that requests for shares far exceed what is being offered. IPO Boutique thinks it is likely shares could price in the range of $120 to $125, well above its current range of $100 to $110.
Snowflake IPO Gets Highest Rating
“The valuation, to traditional investors, appears to be stretched but given this company’s excellent growth profile, strong and highly-unique backers and presence in the cloud/data space, there is an exponential amount of demand for this IPO,” said IPO Boutique in a note to clients. Moreover, it gave the Snowflake IPO its highest rating of 5, on a 1-to-5 scale.
For the six-month period ended July 3, Snowflake reported revenue of $148.9 million, up 189% from the year-ago period. It showed a net loss of $171.3 million, vs. a loss of $177.2 million. The company reports having 3,117 customers.
Berkshire Hathaway stock edged down 0.5%, near 218.95, during afternoon trading on the stock market today. In addition, Salesforce.com climbed 1.5%, near 250.40.
Snowflake is one of several high-profile companies that will make their public debut via an IPO this week.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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