Berkshire Hathaway and Salesforce are poised to invest $250 million or more in Snowflake stock, and experts say it's a sign that the market for managing data is only getting hotter
Summary List Placement
Salesforce and Berkshire Hathaway have both agreed to purchase $250 million in shares in Snowflake's IPO, according to an amended filing released on Tuesday. The data warehousing company initially filed to go public last month, in what's become one of the most-anticipated public debuts for a tech company this year. News of the investment came as Snowflake also set an initial price range for its shares of $75 to $85. Based on that range, Snowflake would be valued between $20.9 billion and $23.7 billion at the time of its IPO, as our colleagues at Markets Insider previously reported. In an amended S-1 filing, Snowflake says that Salesforce and Berkshire Hathaway are each expected to purchase 3.1 million shares, which at $80 per share — the midpoint of its range — adds up to the $250 million figure. Berkshire Hathaway is also purchasing another 4 million Class A shares from former Snowflake CEO Bob Muglia in a secondary transaction, set at the IPO price for each share. That could cost $303 million to $344 million based on the expected price range, so Berkshire Hathaway's total investment in Snowflake shares could be up to $550 million to $590 million in total, as Markets Insider reported. Snowflake's last private valuation was $12.4 billion in February after a funding round that notably included Salesforce Ventures, the cloud software giant's investment arm. Analysts say Salesforce and Berkshire Hathaway's investment shows just how important data has become to businesses and the need for technology like Snowflake's to manage it. They say it gives Snowflake's business validation from both the tech community and investor community. For Salesforce specifically, it also lays the foundation for a stronger partnership with Snowflake down the line. The importance of data The hype around Snowflake's IPO comes in part because of the fast-growing market for helping companies manage and analyze their data. Salesforce itself recently made a big bet on that market with its $15.7 billion purchase of Tableau. "As companies are trying to streamline massive volumes of data, across many different sources and platforms and tools and technology and make all that data usable, Snowflake's technology is becoming increasingly important," said Futurum Research analyst Dan Newman. So for Salesforce and Berkshire Hathaway, it's a way to get in relatively early on a company that's widely anticipated to build a strong position for itself in that market. Snowflake also has partnerships with Amazon Web Services and Microsoft Azure, the two largest cloud providers, meaning that its avenues for growth are strong. "With the large addressable market opportunity as companies continue to move costly, rigid, and proprietary data warehouses to the cloud, there's still a lot of growth opportunity for Snowflake," said Rebecca Wettemann, an analyst at Valoir. Berkshire Hathaway's involvement, and that of its famous CEO Warren Buffett, can be taken as an important seal of approval from the investment community ahead of the official IPO, Newman added. It's rare for Warren Buffett to invest in tech companies, which makes it even more significant, as Market's Insider's Theron Mohame notes. A 'complementary' investment for Salesforce For Salesforce in particular, Snowflake is very "complementary" to its own customer relationship management software, Newman said. The investment could "benefit the company as its users turn to Snowflake to warehouse data, to integrate, streamline, and use as part of their Salesforce platform," he added. Its investment is also an overall validation from the tech community in Snowflake's business. Salesforce likely has a strong self-interest in investing in Snowflake to build on its existing partnership, analysts told Business Insider. "Salesforce in particular would have a vested interest in creating an integrated offering with Snowflake," Nucleus Research analyst Dan Elman said. "Customers themselves have been moving to use Snowflake more and more. So partnering with that brand kind of shows that they're in tune with what's going on in the market and changing customer preferences." Valoir's Wettemann points out that Salesforce has a track record of investing in companies that are complementary to Salesforce's own offerings. Sometimes, those investments set the stage for an acquisition down the line, as we've seen with companies like Vlocity and MuleSoft — both one-time Salesforce Ventures investments that were later bought entirely. As of June, Snowflake already has some integrations with Tableau and other Salesforce applications, making it possible to analyze data across both platforms. Elman expects that partnership to grow given this new investment in the IPO. Ultimately, however, Newman says that the investment says as much as the broader market as it does about any virtue of Snowflake and its technology: "People are very excited about both their specific product and service, but also the marketplace in which Snowflake is operating." Got a tip? Contact this reporter via email at email@example.com or Signal at 925-364-4258. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.Join the conversation about this story » NOW WATCH: Epidemiologists debunk 13 coronavirus myths
More like this (3)
Warren Buffett's Berkshire Hathaway was slammed for not spending when markets crashed. It announced more than $35 billion of investments last quarter
Summary List Placement Warren Buffett's Berkshire Hathaway announced more than $35 billion of investments last quarter....Summary List Placement Warren Buffett's Berkshire Hathaway announced more than $35 billion of investments last quarter. The billionaire investor's company spent almost $18 billion on stocks, repurchased a record $9 billion of its shares, and struck about $10 billion worth of deals. Buffett and his team boosted their Bank of America holding, added Snowflake and four pharmaceutical companies to their portfolio, revealed stakes in...
Tesla has surged past $525 billion in market value and could soon overtake Warren Buffett's Berkshire Hathaway. Here's why that's astounding
Summary List Placement Tesla's market capitalization soared past $525 billion on Tuesday, leaving it within striking...Summary List Placement Tesla's market capitalization soared past $525 billion on Tuesday, leaving it within striking distance of the $549 billion market cap of Warren Buffett's Berkshire Hathaway. Shares in Elon Musk's electric-vehicle company have rocketed up more than 500% this year, while Berkshire stock has only risen 2.4%. The similarity in market caps is surprising, given Berkshire earned $255 billion in revenue last...
Warren Buffett's Berkshire Hathaway swung from extreme caution to a flurry of deals in 6 months. We asked a bunch of experts to analyze its shifting strategy
Summary List Placement Warren Buffett, hunched over a microphone on a stage overlooking a dark, cavernous,...Summary List Placement Warren Buffett, hunched over a microphone on a stage overlooking a dark, cavernous, and virtually empty hall, cut a forlorn figure at Berkshire Hathaway's annual meeting in May. Tens of thousands of Berkshire shareholders usually descend on the billionaire investor and Berkshire CEO's hometown of Omaha to attend the gathering, one of the most significant events on the investing calendar. They...