A Note on Snowflake's Public Debut

Back in June when it came to light that Snowflake was going public, our team at Kähler Insights published a note entitled ‘A Note on Snowflake's IPO Filing’, computed in January before COVID-19. Using our novel mathematical modelling, codenamed ‘Kolmogorov IPO Score’ (in honour of the Russian mathematician Andrey Kolmogorov) we found that Snowflake scored the third highest score at 52%, behind Stripe at 62% and Airbnb at 56%! Therefore the prediction was that Snowflake would have a successful IPO.

Moreover, it is important to note that we don’t consider a first-day trading stock surge of a company as a 'success’ - instead, we define sucess as the ability of the company to maintain strong stock performance until the lockup period expires. So technically, even though Snowflake’s debut appears to have exceeded our team’s expectations by some margin, the Kähler Insights team cannot celebrate its correct prediction until lockup period expires! :)

A Comment on Snowflake’s $60Bn+ Public Valuation

Our most optimistic modelling of Snowflake in terms of valuation before it debuted on the NYSE predicted that the company would debut at a valuation of around $16-22Bn. As such, our prediction was far out of the current $60Bn+ mark! Ironically, $60Bn is at the lower end of what we predicted for an Airbnb public debut ($60-89Bn)!

What could explain such a jump in valuation? Well, we are working hard to figure it out. Two things that we are looking at are the following:

  1. The Warren Buffet Effect: Did the news of ‘Berkshire Hathaway's $570 million bet on Snowflake’ contribute to the excitement of other investors?

  2. The AWS Comparrison Effect: Did articles like ‘Snowflake Gives Investors a Rare Opportunity to Disrupt Amazon’ contribute to investors thinking that Snowflake has a big chance of disrupting AWS? This is despite the fact that currently Snowflake’s product offering is mostly competing with only a very small part of the AWS service catalogue, namely, the datawarehouse service called Amazon Redshift.

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    Disclosure: We have no positions in any of the public companies featured on this post, and have no plans to initiate any positions within the next 7 days.