CNBC Disruptor 50

Snowflake IPO gets vote of confidence as Berkshire, Salesforce agree to buy shares

Key Points
  • Salesforce and Berkshire Hathaway each agreed to purchase $250 million worth of Snowflake stock concurrent with its IPO.
  • Snowflake is expected to go public later this year.

In this article

Frank Slootman, CEO, Snowflake
Source: CNBC

Snowflake received a vote of confidence Tuesday after a filing revealed that Berkshire Hathaway and Salesforce each agreed to purchase $250 million of stock at the IPO price in a concurrent private placement. 

Berkshire Hathaway agreed to buy an additional 4.04 million shares from one of Snowflake's current stockholders in a secondary transaction. The company said that the midpoint of its pricing range for the IPO is expected to be $80 per share, which would value Berkshire Hathaway's stake at more than $550 million at the time it goes public. 

At that price, Snowflake would have a market cap of $22.3 billion, based on the latest shares outstanding count in the prospectus, marking an almost $10 billion increase since February, when Salesforce led a financing round at a $12.4 billion valuation.

The Salesforce move is not particularly surprising, as the company has invested in numerous cloud software companies in recent years, including Zoom, Twilio and Dropbox. It often sells these shares after they go public.

But the Berkshire Hathaway investment is atypical for the company, as Warren Buffett has built a reputation as a value investor who has made high-profile bets on conglomerates. However, he does not make all the investing decisions himself and leans on lieutenants such as Todd Combs and Ted Weschler, especially when it comes to tech stocks. Buffett said last year that "one of the fellows in the office" was responsible for Berkshire's stake in Amazon, likely referring to Combs or Weschler.

Snowflake, which gives businesses new ways to store and access data, is expected to begin trading this year under the ticker symbol "SNOW." The company said in a prospectus last month that revenue in the first half of 2020 more than doubled to $242 million from $104 million a year earlier.

The company ranked No. 40 on this year's CNBC Disruptor 50 list. 

-- CNBC's Jesse Pound contributed to this report.

Subscribe to CNBC on YouTube.

Here's how to start investing beyond your 401(k)
How to start investing beyond your 401(k)