Snowflake Inc.’s record IPO gives the company an impressive valuation that makes other foamy technology names cheap by comparison.
Stocks of Snowflake SNOW,
rose 111.6% in Wednesday’s session after conducting its largest software IPO in history. The stock’s grand rally that took place after Snowflake set its offer above an already elevated price resulted in a market value of approximately $ 70 billion, more than five times its February private market valuation of $ 12.4 billion -Dollar.
According to Dealogic data from 1995, the company is the largest company by market value to ever double on its first day of trading.
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Investors flocked to Snowflake’s stock during a hot time for IPOs, giving the company a rich rating, even by the standards of soaring tech names. Snowflake generated $ 403 million in revenue for the past four quarters by offering database software for the cloud and achieving a market cap to revenue ratio of approximately 175x.
Snowflakes Pop on Day One makes it the most expensive technology name for that metric, based on analysis of data from FactSet that surveyed companies with more than $ 400 million in annual revenue.
Zoom Video Communications Inc. ZM,
believed the krona to be the most expensive technology stock by many standards, but its market value to sales ratio over the past four quarters is only half that of Snowflake, around 87x. Zscaler Inc. ZS,
Another hot name for cloud software has a valuation around 39 times its sales.
According to Beth Kindig, an independent technology investment analyst, Snowflake opened at 98 times its enterprise value for estimated sales over the next 12 months. FactSet does not yet provide forward-looking sales estimates for Snowflake.
This is comparable to 31 times for Zoom on opening day of trading and 23 times for CrowdStrike Inc. CRWD,
When the cybersecurity company made its market debut, Kindig said. Both companies hit a high of just over 40 in the first few months of trading.
Snowflake sold 28 million shares to raise $ 3.36 billion through its offering, and Berkshire Hathaway Inc. BRK.A,
and Salesforce.com Inc. CRM,
Each agreed to simultaneously buy $ 250 million worth of shares at the IPO price, for a grand total of $ 3.86 billion. Underwriters have the option to buy 4.2 million more shares, which could bring the amount Snowflake ultimately brings in to $ 4.4 billion.
“The attention on Snowflake’s IPO is a good example of how accelerating cloud computing is adding value to companies involved in the space, especially those that make it easier to navigate virtualization,” wrote Andrew Little thematic research analyst at Global X dealing with the cloud.
In what is expected to be the busiest week for IPOs since Uber Technologies Inc. debuted in May 2019, Israeli software company JFrog Ltd. FROG,
joined Snowflake with his trading debut on Wednesday. US-listed stocks of JFrog, which makes software for developers, ended the session 47%.
Read: The Sick IPO Market Is Soaking Snowflake, JFrog Is Leaping, And More Software Companies Are Too
Snowflake went public as an initial public offering of the Renaissance IPO ETF.
is up 59% yoy and as the S&P 500 SPX
gained about 5%.