Snowflake’s skyrocketing IPO has echoes of the dotcom boom

Snowflake’s skyrocketing IPO has echoes of the dotcom boom

The Oxford English Dictionary added a new meaning for the word “snowflake” two years ago: a person who is overly sensitive to criticism, or unduly entitled.

After this week’s drama on Wall Street, it might consider adding another: a promising young tech company with such a hot initial public offering that — as its own chief executive suggested — Wall Street investors get “over their skis” in chasing the share price up.

Whether this spectacular stock market phenomenon will turn out to be transitory, like flakes of frozen water evaporating in the spring sunshine, is just one of the intriguing questions it leaves behind.

The stock market debut of Snowflake has certainly gone off with a bang. At a time when Wall Street is ready to send any cloud software stock with a strong growth story to the stratosphere, the data warehousing company was always guaranteed a warm reception. But a market valuation of about $70bn after the first day of trading — or 140 times its current annualised revenues, and nearly six times what the company was judged to be worth in a private fundraising round earlier this year — is head-scratching.

The knock-on effects across the entire sector could be powerful — and particularly on Palantir, whose shares are due to start trading in a direct listing next week. The data analytics company arrives on Wall Street with plenty of baggage, but it has been remaking itself around a platform called Foundry that is not unlike the technology created by Snowflake. After years of dithering about whether or not to go public, Palantir’s timing may turn out to be near-on perfect.