SNOW Share Dilution

I have initiated a modest position in Snowflake this week and was doing some more research to see if I wanted to expand that position. One thing that caught my eye was the amount of share dilution. From the data I could gather, see share counts below:

10/31/2019 (pre-IPO): 45.9M
10/31/2020 (post-IPO): 166.9M
01/31/2021 (guidance from Q3 release): 283M!!

I understand these hyper growth companies dilute their shares for various reasons but this seems excessive. I don’t like the idea of buying shares today only to have their value ultimately cut in half at the next earnings release, especially when this company is valued as it currently is pre-Q4 dilution.

Any thoughts to make this look better than it is?

  • Junomean2
    Long SNOW.
8 Likes

Juno,

SNOW market cap is $85bil. It has always taken into account 283mil shares post-IPO. This isn’t new dilution.

Bnh

10 Likes

The issue is not with the shares outstanding but with the Float which is the number of shares available for trading. The other shares not available for trading are part of the total outstanding shares and are used to compute market cap but cannot currently be bought or sold.

According to the SNOW S1-A filing on page 130 it states that all remaining shares held by stockholders not previously eligible for sale and not purchased in the concurrent private placements or the secondary transaction will be available for trading on the commencement of the 2nd full day of trading following our second public release of quarterly or annual financial results following the date of this prospectus.

So what that means in English is:
Float today is 50.7M (that is how many shares are tradeable)
SNOW is expected to announce earnings on March 3.
On March 5 the lockup expires and potentially another 231M shares will be available for sale.
That is roughly 4.5X the current float.

Not sure if those will all be available for trading or the S1-A language about “concurrent private placements or the secondary transaction” means there are still some shares that have lockups after March 5.

When can Warren Buffet / Berkshire sell their shares?

So the million dollar question is - what impact will that have on share price?
Will all those shareholders sell on March 5 after their lockup expires and drive the price down, or will they hold and maintain the then current market cap and will it runup more in the meantime?

If someone has a crystal ball on this it would be great to share what you see.

26 Likes

Clyde,

Lockup expirations are known events. There are always buyers waiting for the lockup expiration to jump in too. Pretty much every IPO stock I see gets sold off more on the fear of the lockup expiration prior to it than the lockup itself.

SNOW had an early lockup release >30million of the shares you mentioned on Jan 7th (so add these to the free float) and the stock shot up more than 10% that day. There was also a smaller amount unlocked early in mid- December. I wouldn’t worry too much about it, especially with a stock in an industry with as much investor demand as SNOW. Will there be pressure before the lockup? Probably. After? Flip a coin. Long term it won’t mean anything.

Bnh

8 Likes

…Will all those shareholders sell on March 5 after their lockup expires and drive the price down…

Probably not, but I hope that they will, as I have money set aside to buy when the price is right!

Probably not, but I hope that they will, as I have money set aside to buy when the price is right!

Looking at the charts I am thinking if the earnings are good and the company is hitting on all cylinders, nobody will be selling anything at these prices.

However, expect the AI to create a narrative and attempt to move the price
lower on larger losses and share dilution.

I say go for it! I missed the last sell because I was greedy. I will be filling out my positions on the dips if it looks like the company is still rocking along.

Cheers
Qazulight