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Summary
- Snowflake enables users to transform into data-driven businesses and improve data mobility, silos, security, sharing, decision-making, and partnerships.
- Operating as a Platform-as-a-Service (PaaS), the company enables customers to drive operational practices instead of managing complicated and expensive infrastructure.
- On Wednesday, Snowflake Inc. debuted on the New York Stock Exchange under the symbol SNOW. Its shares closed over 100% by the end of the trading session, giving market capitalisation of just over $70 billion.
Snowflake Inc. made a debut at the New York Stock Exchange on Wednesday, 16 September. With the backing of Warren Buffet’s Berkshire Hathaway, the market hype around the stock remained immense, sending the stock over 100% on the first day of trading.
The startup also counts Salesforce as its shareholder alongside Berkshire Hathaway. Snowflake has now been labelled as the biggest software IPO ever, owing to bumper response on the day one.
Snowflake shares were priced at $120 per share, which has been revised from the initial estimates of $75 to $85 per share.
During the day’s trading, Snowflake shares also touched $319, and speculators have booked profits as shares closed at $253.93, giving market capitalisation of around $70 billion.
Snowflake has sold 28 million shares through the IPO, raising ~$3.36 billion. Salesforce and Berkshire Hathaway have invested quarter-a-billion dollar each in the company at the IPO offer price, taking raised money to $3.86 billion.
Should underwriters exercise options worth 4.2 million shares, the total raised money by the company will be more than $4.4 billion.
Interest Rates and Growth Deprived World
Since the pandemic broke and caused one of the steepest falls in markets, investors have favoured technology companies. Snowflake, a data warehousing company, has also buoyed investors with a similar technology proposition.
Interest rates are now trending at the lowest level, and the lower US Government bond yields also indicate the cheaper cost of capital.
When businesses can fund operations at a cheaper cost, while return on investment is well above of cost of capital; the market will mostly give premium to such businesses.
As interest rates are lower and likely to remain lower for a longer period while the inflation has been allowed to run above 2%, market participants have gone berserk for companies that can deliver growth, therefore taking multiples to astronomical levels.
Looking at tech companies this year, investor traction has been superior, and the market has rewarded tech companies carrying firepower to exhibit top-line and bottom-line growth over the future.
It is a fact that technology companies, especially data-alike business, have seen broader tailwinds at the backdrop of the pandemic because most of the world is operating remotely and applications of data have soared.
Snowflake – A Data Warehousing Company
On a TTM basis, the company recorded revenue of $403 million, with 121% year-on-year growth in the second quarter FY21 revenue at $133 million.
Snowflake specialises in Data Cloud through its platform, enabling customers to consolidate data for meaningful business insight, data sharing and applications.
The company charges customers based on the usage. The proposition to customers is a solution to data silos, where only one group can access data at a time, and data governance.
It leverages the public cloud and allows customers to use data for multiple uses.
The platform enables data mobility within the organisation and outside securely without moving or copying data. With a Platform-as-a-Service (PaaS) business model, Snowflake’s platform has near-zero maintenance.
Snowflake supports data lakes, data engineering, data warehousing, data applications, data sharing, and data science.
Businesses leverage their services for data migration, machine learning algorithms, and accelerate cloud strategies.
It was also noted that the transition of siloed data from cloud-based repositories and on-premises data centres to the data cloud would benefit the business by network effects.
As the reach and footprint of its cloud platform increase over time, the customers of Snowflake would be able to mobilise data within them, improving value for all users.
Snowflake has a dedicated direct sales team to market its cloud data platform. The sales team is further segregated based on customer size and region. They are focused on new client acquisitions and increasing usage of the platform from existing customers.
Initially, most of its customers on-board through a self-service trial on the website, and Snowflake applies strategies to drive traffic to its website.
Its platform is used in organisations of all sizes across several industries. Over the year to 31 July 2020, the number of customers of the company increased to 3,117 from 1,547 a year ago.
In the year ended 31 January 2020, the company recorded revenue of $264.7 million compared to $96.7 million in the previous year, depicting a growth of 174%. Net loss for the year stood at $348.5 million compared to $178 million in the previous year.
For the six months ended 31 July 2020, Snowflake recorded revenue of $242 million against $104 million in the same period last year, showing a growth of 133%. Net loss for the period was $171.3 million compared to $177.2 million in the same period last year.
Its operating cash position has improved significantly in the six-month period ended 31 July 2020 compared to the same period last year. Net cash used in operating activities was an outflow of $45.27 million compared to an outflow of $110.01 million in the same period last year.
(All currencies in USD, unless or otherwise stated)
