October 22, 2020

Market and Financial News Aggregator

Warren Buffett’s Berkshire Hathaway buys up Snowflake ahead of its IPO

2 min read

Berkshire Hathaway is not known for its tech-investing chops, with Warren Buffett famously missing out on the sector’s enormous rally of recent decades and only investing in Apple and Amazon in 2016 and 2019 respectively—long after the duo had become established players.

Now, amid cries that tech companies are overvalued, in part due to a work-from-home rally, Berkshire Hathaway is not shying away.

The investing giant is leaping into one of the hottest initial public offerings of a tech company this year. Snowflake, a cloud database software provider, revealed on Tuesday that Berkshire Hathaway plans to buy some $250 million worth of shares at its IPO price and another 4 million shares from an existing investor also at the same price. At the midpoint of the estimated range at which Snowflake could debut, $80 apiece, Berkshire Hathaway would be buying a $570 million stake in the company that could be valued at over $22 billion. 

While Buffett is better known for less exciting and more reliable bets on the likes of Geico and Coca-Cola, Berkshire Hathaway has been slowly digging into the tech space. At Berkshire’s 2018 annual shareholder meeting, Buffett declared that the largest companies by market cap were ones without net tangible assets, adding that he had made a mistake by not acquiring shares of Alphabet, Google’s parent company, earlier on.

For a sign of what Berkshire Hathaway may become then, look to Buffett’s younger lieutenants, who he has often leaned on to make the calls in tech. In 2018, Berkshire invested in two payments companies abroad, plowing $600 million altogether into Brazil’s StoneCo and India’s Paytm in deals that were largely attributed to Todd Combs, one of Berkshire’s portfolio managers. Similarly with Berkshire’s bet on Amazon, Buffett noted that “one of the fellows in the office that manage money” acquired some shares of e-commerce company, likely referring to Combs or Ted Weschler, another portfolio manager.

While they may not be helmed by Buffett, the bets still have features of the Oracle’s own investing style: StoneCo, Paytm, and Amazon are all leaders in their spaces, creating a moat against competitors.

Though unclear who led the latest deal, when it comes to Snowflake—well, a business with recurring revenue is just about as steady as it goes in tech.

Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com

Lucinda Shen

2020-09-09 10:41:59

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