Yesterday ahead of its expected IPO (initial public offering) pricing date, cloud-based data-warehousing start-up Snowflake raised its expected pricing range from $ 100 to $ 110 per share, to a previous range of $ 75 to $ 85. extent to. The increase suggests investors’ demand for the deal is strong, which will allow Snowflake to raise more capital to help future growth.
Know here which potential investors need to know
Valid as over $ 30 billion
At the midpoint of the new range ($ 105), Snowflake now expects to achieve net income of $ 3.3 billion, up from previous expectations of $ 2.7 billion. If the underwriters exercise their option to purchase additional shares, the hull could rise to $ 3.8 billion.
Those earnings will include two concurrent private placements Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) And Salesforce Ventures, the venture capital arm of salesforce.com (NYSE: CRM). The increased limit will affect both Berkshire Hathaway and Salesforce Ventures, as the private placement will be at the same price as the IPO. These investors have agreed to invest $ 250 million each, which will now buy only 2.4 million shares instead of 3.1 million shares.
Based on a total of 277.3 million Class A and Class B shares that would be outstanding after the offer, Snowflake would be $ 27.7 billion to $ 30.5 billion. This valuation is slightly higher than the initial estimate of $ 20.9 billion to $ 23.7 billion (which was based on a slightly higher number of expected shares).
At midpoint, Snowflake will cost 72 times more, about $ 402 million more than its 12-month (TTM). This is also an incredibly lofty valuation for enterprise software-as-a-service (SaaS) shares, which often receive premium valuations because SaaS companies often provide critical services to large enterprise customers while generating high-enterprise recurring revenue She does.
Snowflake justifies this premium with somewhat stronger growth: Revenue rose 121% to $ 133.1 million in the fiscal second quarter. TTM revenue is 138% higher than a year ago. And Snowflake is rapidly expanding its relationships with existing customers with a 158% net revenue retention rate for the first half of this financial year. The company is not yet profitable, but when was the last time investors in high-growth tech stocks took care of black ink?
As is often the case with tech companies these days, Snowflake will feature a dual-class structure designed to maintain control among insiders. Class B shares are entitled to 10 votes per share, according to the latest prospectus, and will win 98.5% of the total voting power internally.
It is worth noting that this offering can potentially price even higher than the potential limit, which is not uncommon when investor demand is high. The IPO needs a price tomorrow, and the shares will start trading the next day under the ticker “NYSE: SNOY”.