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IPO 1999 is like: Snowflake and other software stocks near market dot-com-boom level

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As the importance of cloud software in the global pandemic has increased, cloud-software companies have become the best example of how initial public offerings reach the dot-com-boom level.

This week saw the stunning performance of four major software IPOs. On Wednesday, two cloud-software companies reached a level on Wall Street, rang bells on their respective exchanges and then their shares soared even in 1999. Snowflake Inc. SNOW,
+ 5.47%
A software company withdrew a record amount, and shares rose 112 percent to more than $ 70 billion in market value on the first day of trading on the New York Stock Exchange. Delogic said Snowflake has the greatest value of doubling the price of a company making its debut in the market based on data dating back to 1995.

Matthew Kennedy, Senior Marketing Strategist for Renaissance Capital, which manages two IPO-focused ETF IPOs;
+ 1.13%

+ 0.03%,
In the first trading day since 2000, there has never been an IPO that raised more than $ 1 billion; Snowflake could raise more than $ 4 billion. The closest comparison this year will be Bigcom Holdings BGC,
+ 1.28%,
It rose 201% in August, according to nCino Inc. NCNO,
+ 1.73%
In July, it rose 195%.

Snowflake was not alone in the software sector this week. Jeffrog Ltd. Frog,
+ 0.49%,
Nasdaq on Wednesday launched a service that allows companies to release software upgrades quickly and seamlessly to all their users and / or employees. Like Snowflake, the company increased its IPO range and paid more than the higher target, and then the shares jumped in the debut, albeit at a lower level. Later on Wednesday, cloud-based AI software developer Sumo Logic Inc. SUMO,
Its IPO price was higher than expected, and shares rose more than 20 percent on Thursday; On Friday, Unity Software Inc. U,
+ 31.44%
, A platform for developing 3D content, including video games, rose 31.4% after a higher-than-expected range.

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More: Snowflake was red-hot, and Jeffrog made its market debut

In the case of Snowflake, investors were excited about the company’s marketplace, where the cloud-based data platform competes with cloud-based service providers and legacy database software companies such as Oracle Corporation. ORCL,
They were excited to be part of a deal with Warren Buffett’s Berkshire Hathaway Corporation. BRK.A,
+ 0.36%

+ 0.07%
– Generally averse to technology companies and IPOs – as well as Inc.
The two companies bought 250 million shares in an IPO, while Berkshire bought another 4 million shares from the former chief executive of Snowflake.

See also: Five Things to Know About Snowflake Record Software IPO

Kovid-19 provides a boost to pandemic cloud-software companies as they seek to strengthen and strengthen existing relationships with companies that help employees maintain productivity while working from home. Zoom Video Inc. JFrog, like ZM
+ 6.19%,
Executives say deals are taking longer to close, but there has been growing interest in Pandemic. GeFrog’s 5,800 paying customers come from major tech companies such as Microsoft Corporation MSFT.
American Express Company AXP,
Morgan Stanley MS.
To industrial establishments.

“Software is becoming an integral part of our lives, and Covid crystallized the need for digital transformation,” Jeffrog’s chief financial officer Jacob Schulman told Market Watch in an interview on Wednesday afternoon. “That’s where our products help customers.”

However, this is not just software – the IPO market is in big tears this year. With the exception of this week, Jay Ritter, a Cordell scholar at the University of Florida’s Department of Finance, said that the returns on the first day of IPOs so far this year are about 42% – “the highest average since the Internet bubble. ”

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Ritter commented that one big difference from advertising companies in 1999-2000 was that many of those young internet companies had very low returns.

“Almost all tech companies like Snowflake have significant sales this year,” he said. “As they get older, they have proven that they can sell a product or service to themselves.

Since 2015: Why this technological leap is different than the dot-com bubble

Ritter points out that Snowflake is recording another record: the amount of money left on the company’s desk, the difference between the funds raised in the company’s offer, and the stock jump after it’s started. Trading in the open market.

“It looks like it’s close to $ 4 billion right after the visa,” Ritter said, leaving $ 5.075 billion out of 406 million shares in the 2008 IPO. Snowflake only offered 28 million shares.

“The market is really paying for growth,” Ritter said. “Is the market paying too much? It’s really hard to argue that they pay very little. ”

For investors who want these cloud companies at a high level, it is impossible to pay less. But it feels like the hysteria of young tech companies and the promises of 1999 growth.

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