Warren Buffett's Berkshire Hathaway investing $570mn in Snowflake
In a major, albeit surprising, move, Berkshire Hathaway, the multinational conglomerate led by investing legend Warren Buffett, has confirmed the plan to infuse nearly $570 million into Snowflake, a cloud data-warehousing unicorn in the US. The investment, the company has said, will be made immediately after Snowflake's IPO launch in the coming weeks. Here's all you need to know about it.
According to filings with the US SEC, Snowflake will be making an initial public offer at an estimated price of about $75 to $85 per share. At this rate, the company is targeting a valuation between $20.9 billion and $23.7 billion - a sum that makes up more than 78 times the revenue it reported in the last fiscal year.
In the regulatory filing, Snowflake has said that Berkshire Hathaway will purchase $250 million of its Class A common stock in a private placement at a price per share equal to the IPO price. This, based on the midpoint of the expected price per share range, means that Berkshire would be acquiring around 3.1 million shares in the company.
Along with the $250 million private placement, Berkshire will also purchase over 4 million shares from former Snowflake CEO Robert Muglia at the IPO price. This way, on the whole, the company will be investing between $550 and $590 million to take around 7 million shares - approximately a 2.5-2.6% stake - in the venture-backed software group.
The move is hailed as surprising because it is a departure from the Berkshire's traditional strategy of backing steady, reliable businesses involved in sectors like utilities, manufacturing, retail, banking, and insurance. The Buffett-led firm has mostly stayed clear of technology stocks, especially those of companies like Snowflake - which lost nearly $350 million in the last fiscal alone.