Snowflake, an American tech startup focused on cloud data management, made the richest stock market debut in history for a software company on Wednesday. Before starting to sell on Wall Street, Snowflake had set the price of his shares at $ 120 each, but the demand was so high that within hours of the opening of the markets they were selling at $ 319. At the end of the day, the stock price was $ 253, more than double the initial demand. Snowflake, which was valued at $ 12.4 billion in February of this year, was worth more than $ 80 on Wednesday night.
What is Snowflake
In English it is said that Snowflake does “warehousing”: it means that its software allows companies to manage the growing amount of data products and to use them more efficiently. In particular, Snowflake specializes in the cloud sector. Most companies no longer store data on their own computers, but entrust them to services that make them available and more accessible through the internet. The leading cloud service providers in the world are Amazon, Google, Microsoft and Oracle.
Often, however, a company entrusts its data to multiple suppliers, to take advantage of different services and more advantageous prices. In a large company it may happen that some of the data is on Oracle's cloud and another on Amazon's, as happens for example to Zoom, the video calling company (Zoom is not a Snowflake customer). This can lead to confusion and fragmentation, and Snowflake claims that its software solves this problem: it works with various platforms and allows you to keep everything organized and efficient, as well as to do sophisticated analysis on all this data.
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Because it has had all this success on the stock market
The cloud has been in vogue for some time, but after the pandemic it is one of the sectors with the best growth prospects. Through the internet, the cloud makes a company's data, documents and files available to all the computers that need it, and this greatly facilitates remote work. Without the cloud, this spring's lockdown would have been a disaster for many companies, and now as remote working becomes more common – and new lockdowns are feared – anyone with a product that works well with the cloud is doing great business ( in general, anyone involved in technology is doing them: the American Nasdaq list, the one that hosts technology companies, has grown by 23 percent since the beginning of the year). Snowflake sales increased 174 percent in the last fiscal year, and doubled in the most recent quarter from the same period last year.
The enthusiasm towards Snowflake was also heightened by the fact that Warren Buffett, the famous American investor, decided before the opening of the markets to buy 250 million dollars of shares in the company (therefore he bought them at the price initially set. , $ 120 each). Buffett is known to be generally skeptical of tech companies, and especially he hadn't invested in an IPO, that is, a stock market debut, in a few decades. The last time was in 1956 with Ford. His decision to invest in Snowflake, therefore, is in a certain sense extraordinary and was seen as a sign of approval of the strength and value of the company.
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Can things go on like this?
After the great success of Wednesday, the day of the debut, the stock of Snowflake fell by 11% on Thursday about. According to analysts, after such a remarkable growth it is inevitable that there will be some adjustments. Other companies that sparked great excitement on their stock debut, such as Facebook in 2012, then experienced months of declining share prices before starting to rise again. According to Wall Street Journal analyst Dan Gallagher, such an important quotation “sets the bar very high for the company, which has so far done very well”.
According to Gallagher, Snowflake's fundamentals are solid. The company, which was founded in 2012, has not yet made a profit, but this is normal for many tech startups and, Gallagher writes, is mitigated by the high growth rate and the many billions raised with the listing. However, the valuation of the stock market remains “stratospheric”, and Snowflake will have to continue to grow at a very high rate in order not to lose value on the stock market.
