Berkshire Hathaway and Salesforce Purchase $500M Worth of Snowflake Stock at IPO Set Price

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by Steve Muchoki · 2 min read
Berkshire Hathaway and Salesforce Purchase $500M Worth of Snowflake Stock at IPO Set Price
Photo: Snowflake Inc. / Facebook

Snowflake anticipates raising funds through an IPO later this year. Some of the main venture-capital backers that support Snowflake include Sutter Hill Ventures, Sequoia Capital, Redpoint Ventures, Iconiq and Wing Venture Capital.

American cloud-based software company Salesforce.com Inc (NYSE: CRM) and American multinational conglomerate holding company Berkshire Hathaway Inc (NYSE: BRK.A) have come to a common agreement to purchase each $250 million worth of stock from Snowflake, a cloud-based data-warehousing startup founded in 2012.

In addition, Berkshire Hathaway agreed to purchase an additional 4.04 million shares from one of Snowflake’s current stockholders in a secondary transaction.

As a result, Berkshire Hathaway has invested approximately $570 million in the company. An indication there is an increased demand for cloud data services as global business slowly reopens after the coronavirus shutdown.

The billion-dollar company has had private fundings previously that has seen its valuation set at around $12 billion as at the beginning of the year.

Some of the main venture-capital backers that support Snowflake include Sutter Hill Ventures, Sequoia Capital, Redpoint Ventures, Iconiq and Wing Venture Capital.

Although having been in business for several years, it began capitalizing on its potential two years ago. In January 2018, the company announced a $263 million investment round putting its valuation at $1.5 billion. Later on in October 2018, the company raised another $450 million, hence raising its valuation to $3.5 billion. Earlier in 2020, the company raised another $479M, consequently increasing its valuation to $12.4B.

Strategic Investment by Berkshire Hathaway and Salesforce in Snowflake

Cloud-based technology companies have seen tremendous growth since the onset of the coronavirus pandemic. This has been largely attributed to the fact that most businesses are investing in working online and remotely to keep their operations running despite the lockdowns.

The partnership between Salesforce and Berkshire Hathaway is a strategic one for the Snowflake Inc investment.

This is primarily because salesforce.com, inc. largely engages in the design and development of cloud-based enterprise software for customer relationship management, whereas the latter is an investment company that seeks to put cash in future promising projects.

With such a significant investment, Salesforce is going to have a considerable say in the Snowflake board. Seemingly, Berkshire Hathaway will be leaning on Salesforce to make their decision since they do not have expertise matching the latter.

Notably, Salesforce shares dropped 5.27% yesterday to close the day trading at $241.27, and are 0.11% down in premarket.

On the other hand, Berkshire Hathaway shares closed yesterday trading at $217.80, approximately 0.24% down, and are 0.34% down in pre-market on Wednesday.

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Steve Muchoki

A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies. Mythology is my mystery! "You cannot enslave a mind that knows itself. That values itself. That understands itself."

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