Snowflake IPO: Data Warehousing Company Confidentially Files
In 2019, it was announced that a Snowflake IPO would come to the market. The company confidentially filed with the SEC in June 2020. Now the Snowflake S-1 filing is public. So investors want to know when to expect Snowflake stock.
But is Snowflake a good investment? Here’s what we know…
Snowflake IPO: The Business
Three data warehousing experts founded Snowflake in 2012. Its name is a nod to their love of snow sports. The company’s first CEO was venture capitalist Mike Speiser. He remained at the company while it was in stealth mode. It wasn’t until October 2014 that Snowflake launched to the general public under its new CEO, Bob Muglia. Muglia brought experience from his time with Microsoft, where he held several executive positions.
Snowflake is a data warehousing company. It offers cloud-based data storage and analytics services. These allow corporate users to store and analyze data using cloud-based hardware and software. Snowflake’s services currently run on Amazon S3, Microsoft Azure and Google Cloud Platform. The company’s Snowflake Data Exchange lets customers discover, exchange and securely share data.
In 2019, former ServiceNow CEO Frank Slootman became Snowflake’s new CEO. And in October 2019, he said there might be a Snowflake IPO in the summer of 2020. The company recently reached a valuation of $12.4 billion. And it now looks to be worth even more.
Snowflake Funding Gives Lofty Valuation
Snowflake ended its Series G funding in February. The round closed with $479 million raised. With that amount, Snowflake has raised $1.4 billion since its founding and reached a valuation of $12.4 billion.
This isn’t unusual for tech startups. But Slootman thinks the Snowflake IPO will further increase the company’s value. At the time of the company’s last funding round, he claimed revenue had grown 174% from last year and would soon hit $1 billion. He stated…
The reason is that our growth trajectory is so fierce and our addressable market is so large. When companies grow so fast, as Snowflake has, the valuation may seem like a big number now, but not later. When I was with ServiceNow, the valuation was $2.5 billion when we went out, and now it has a $65 billion valuation.
Analysts estimate that the launch of Snowflake stock could bring the company’s value to $20 billion. And the timing couldn’t be better for this tech startup.
Snowflake Stock: Coronavirus Creates Demand for Cloud Services
Since social distancing orders in March 2020, more employees are working from home. As a result, companies need better platforms to store data and information online. This allows employees to be more productive from home.
So demand for cloud services has increased. And this led to the successful IPO of Kingsoft, a cloud service provider in China. It’s also why the Snowflake IPO is likely to be successful. Cloud service providers let companies store data online rather than in a physical location. This lets employees access data from almost anywhere.
I’ve been getting emails from CTOs all over the place saying that COVID-19 is accelerating their interest. It’s become a catalyst for driving investments in data platforms. The reason is, they’re trying to figure out what the hell is happening to them. There’s an old soccer player in Europe who used to say, ‘Every disadvantage has its advantage.’ And that’s sort of what’s happening here. We’ve become a beneficiary of really bad things happening in the world because they need our platform to help understand it.
Although countries are starting to reopen, it’s likely that social distancing practices will continue until there is a coronavirus vaccine. This could give companies like Snowflake a long-term advantage.
In Snowflake’s prospectus, the company claims the addressable market opportunity for its platform is $81 billion as of January 31, 2020. Snowflake also believes it can address the markets for analytics data management and integration platforms as well as business intelligence and analytics tools. These markets will have a combined value of $56 billion by the end of 2020 and $84 billion by 2023.
If you’re interested in investing in Snowflake stock, you’ll want to know more about its finances.
Snowflake S-1: The Finances
In the company’s filing, it provides financial data for the fiscal years ending January 31, 2019, and January 31, 2020.
In the fiscal year ending in 2019, Snowflake’s revenue was $96.7 million. It increased to $264.75 million for the year ending in 2020. But even with this revenue growth, the company’s net loss got worse. From the fiscal year ending in 2019 to the fiscal year ending in 2020, sales and marketing costs, as well as general and administrative costs, more than doubled. Research and development costs also increased by 53%. This was a big factor in Snowflake’s net loss, which went from $178 million to $347.5 million.
The Snowflake S-1 filing also provided financial data for the six months ending July 31, 2019 and July 31, 2020.
Compared with 2019, revenue increased 133%, from $104 million to $242 million. Snowflake’s expenses also increased, though not as much as in previous fiscal years. Sales and marketing expenses increased by 38.6%, research and development expenses by 46%, and general and administrative expenses by 27.8%.
Snowflake’s large growth in revenue and small increases in expense led the company to decrease its net loss. It went from $177.2 million to $171.2 million. If the company can continue to increase revenue at a rate that outpaces expenses, Snowflake could be on the path to profit.
And now the big Snowflake IPO question investors have is…
When Will Snowflake IPO?
Initially, Snowflake confidentially filed with the SEC. That meant the company’s filing didn’t need to be public until 15 days before its roadshows. Because of this, Snowflake was less likely to be affected by market fluctuations and investor criticism as it prepared to launch on the market.
But on August 24, 2020, the Snowflake filing became public. Although the number of shares and the price range are unknown, the company is looking for a deal worth $2 billion. Snowflake filed to trade on the NYSE under the ticker symbol SNOW.
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Investors should keep an eye out for the Snowflake IPO pricing. As the markets show signs of recovery from the coronavirus crash, the timing couldn’t be better for Snowflake stock.
About Amber Deter
Amber Deter has researched and written about initial public offerings (IPOs) over the last few years. After starting her college career studying accounting and business, Amber decided to focus on her love of writing. Now she’s able to bring that experience to Investment U readers by providing in-depth research on IPO and investing opportunities.