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The risks of Snowflake’s IPO

September 16, 2020, 2:36 PM UTC

Last valued at $12.4 billion in private funding, cloud software company Snowflake reached a $33.3 billion valuation after pricing its initial public offering late Tuesday.

Flexing the massive investor demand in the data warehousing company, Snowflake sold 28 million shares priced above range, at $120 apiece, raising nearly $3.4 billion. The pricing implied that the company held a market value above that of Twitter ($31 billion) and Airbnb (reportedly last valued at $18 billion). 

It’s not hard to see why investors are enamored: Snowflake is an enterprise tech company operating at a time when work-from-home has become the norm, in a sector that has stood staunch against the coronavirus and even experienced a boost. 

It also operates in one of the buzziest of buzzes in tech: the cloud. In that space, it’s considered the younger, more agile competitor, with the potential to capture more of the market as data warehouses shift to cloud. Meanwhile, Oracle, which has long dominated the warehouse space, is expected to move more slowly in its transformation, per my colleague Aaron Pressman.

Snowflake nearly tripled revenue in the year ending Jan. 31, pushing the figure to $264.7 million in 2020, and appears on track to double that figure again this year

Despite its massive growth, Snowflake is not without its sore points. Even as it competes with the likes of Amazon, Google, and Microsoft, the company is still dependent on infrastructure from, yes, Amazon, Google, and Microsoft. That puts Snowflake at risk if prices there rise—and if those same cloud providers decide to embed certain interoperating privileges that encourage customers to use, say, Amazon over Snowflake (which echoes, at least for me, antirrust criticism Apple is currently facing over the bundling of its products). The company acknowledged as much in its IPO filing:

“Our platform currently operates on public cloud infrastructure provided by Amazon Web Services, Microsoft Azure, and Google Cloud Platform,” the filing read. “Our costs and gross margins are significantly influenced by the prices we are able to negotiate with these public cloud providers, which in certain cases are also our competitors… 

“There is risk that one or more of these public cloud providers could use their respective control of their public clouds to embed innovations or privileged interoperating capabilities in competing products.”

Snowflake is set to debut on the NYSE as “SNOW.”

NIKOLA: After short seller Hindenburg Research published a 67-page report accusing the electric truck maker of fraud last week, regulators have gotten involved in investigating the claims. According to the Wall Street Journal, the Justice Department has joined the Securities and Exchange Commission to look into the claims regarding Nikola. Hindenburg has accused Nikola, which went public via merger with a SPAC earlier this year, of misleading investors over the progress of its technology. Nikola has refuted the report. Read more.

Lucinda Shen
Twitter: @shenlucinda


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- National Fire & Safety, a portfolio company of Highview Capital, acquired Element Fire Protection, a Phoenix-based fire safety service and inspection provider. Financial terms weren't disclosed.

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- The Silverfern Group and One Equity Partners acquired American Medical Technologies, an Irvine, Calif.-based provider of post-acute care programs. Financial terms weren't disclosed.

- Liquid Environmental Solutions, backed by Audax Private Equity, acquired FloHawks, a Puyallup, Wash.-based provider of commercial and residential pumping and septic services. Financial terms weren't disclosed.

- Doxim, a portfolio company of ​​​​​​​​GI Partners, acquired Striata, a New York-based provider of customer communications management. Financial terms weren't disclosed.

- GI Partners agreed to acquire Sectigo, a Roseland, N.J.-based provider of automated digital identity management. Fitnerm.

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- ZTO Express Cayman (NYSE: ZTO), a Chinese-based express delivery company, is looking to raise as much as HK$12 billion ($1.56 billion) in a second listing in Hong Kong. 

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- Obvious Ventures added Tina Hoang-To as a partner. 

- Petra Capital Partners added Sean Murphy as a senior associate.

- Partech hired Andrew Whiting as a Partech Growth principal and Klaudyna Augler, as a Partech Growth senior associate.