The SNOW IPO - What's Missing...

As always valuable and thoughtful post from Muji on the SNOW IPO: https://discussion.fool.com/a-snowflake-deep-dive-34615482.aspx?..

SNOW certainly looks like a hypergrowth company and will land in many portfolio’s here. BUT, why buy on opening day?

CRWD - popped when it opened but there was plenty of time to buy at a lower price: https://yhoo.it/2FwGGJc

DDOG - didn’t pop on it’s IPO as much but certainly plenty of time to buy lower: https://yhoo.it/2GTbrso

FSLY - declined after it’s IPO too: https://yhoo.it/2E57K1W

So my question is - when so many of our hypergrowth companies decline after their IPO… why the rush to get in on the IPO day?

We are not day traders! Certainly the goal of most here isn’t to buy Wednesday and sell Wednesday?

So why all the excitement and posts about rushing to purchase on the IPO day?

I’m still new around these parts. So appreciate you all letting me and others know what we might be missing … and why people are so excited about trying to buy right at the IPO?

Thank you!

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I didn’t interpret the posts on here as implying most folks were planning to buy in on day 1. Even my post this morning notes that it starts trading tomorrow but I didn’t mean to say that I think backing up the truck on IPO day is the right move.

In addition to the companies you listed above, even ZM also dropped about 15% over the first two months after the shares started trading last year.

It all depends on the price. If SNOW trades in the $120-125 range tomorrow, I may consider a small initial purchase with the hope to average down later. If it opens closer to $150 or more tomorrow, which it probably will, I will be more likely to hold off and see how the stock moves over the next few weeks.

Who knows, if the price doesn’t make sense to me I may not buy in at all, although this is a company I would love to own a piece of.

-mekong

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After two years on this board I still feel new as well. I find it hard to do a lot of research alongside a day job so have relied a lot on the posters here.

Today was the first time I have read an S-1.

https://www.sec.gov/Archives/edgar/data/1640147/000162828020…

It appears some shares (25%) are released mid-November or early-December (depending on stock price performance), with the remainder released on the date of the 2nd earnings report following the IPO, so roughly early-Feb, I would guess.

Lots of time to buy on the dips.

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I think Snowflake is slated to go public on Wednesday, September 16 and not tomorrow (Tuesday, September 15th). So I am not sure if you could trade $SNOW on Tuesday.

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Some data on recent high-growth IPO’s (IPO date / closing price IPO day / Lowest price since IPO / % difference):

JAMF - 22 July / 39.20 / 33.09 / -16% (Note: Currently at all time low)
NCNO - 14 July / 91.59 / 68.24 / -25%
LMND - 2 July / 69.41 / 47.18 / -32% (Note; Currently near all time low)
BIGC - 5 Aug / 72.27 / 64.5 / -11%
GOCO - 15 July / 19.46 / 12.77 / -34% (Note: Currently near all time low)
API - 26 June / 50.50 / 36.32 / -28%

I might be missing some high growth IPO’s but in all the high growth IPO’s I remember, the stock price dropped at least 10% compared to opening day at one point in time.

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Yes but when do IPO decline? And if they do, is it part of a general or tech sector decline when other desirable stocks are also on sale? I don’t buy IPO 'cause I can not get the good ones at IPO price.
I have heard that 3 months after IPO is a good time to look but have not researched it out. Unfortunately by 3 months I have usually forgotten about them.

I have read that most IPO issues are harshly treated after their first earnings release as a public company. Maybe start looking 3 weeks before the first earnings release?

Cramer might have a suggestion on what to do.

https://www.cnbc.com/amp/2020/09/14/jim-cramer-reveals-playb…

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I just checked and saw this.

https://finance.yahoo.com/news/snowflake-prices-ipo-above-ma…

They are pricing at $120 instead of the original price of $75-$85.

The lockup period for SNOW is 91 days. Afterward is a good time to buy. Many stockholders will sell at that time, I’ve read. Here is part of the lockup explanation for SNOW from sec.gov.

•Beginning on the 91st day after the date of this prospectus, our current employees with a title below vice president, current contractors, former employees (other than Robert L. Muglia, our former chief executive officer, and his affiliates), and former contractors, may sell a number of shares equal to 25% of their Vested Holdings

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Thankfully this is IPO-ing tomorrow instead of Friday or they would have been raising it another $20 dollars per day.

I wouldn’t be surprised to see this in the $175-200 range tomorrow with all the hype on this. I planned on buying a small amount but will not be if that is the range where it opens. There will be better opportunities when the hype fades and lockup ends in 90 days.

Bnh

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Was notified by Fidelity that SNOW will be priced at $120/sh, which will be over
50 P/S, I believe.

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They are pricing at $120 instead of the original price of $75-$85.

At that price the EV/S is about 37. Pretty pricey if you ask me even for SNOW. And I doubt it will stay long at $120. So for me its a pass for now.

cheers

arnie

The indications are for opening trades to exceed $230/share.

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CNBC just stated it is set to open at ~$235. This is a ~65bil valuation. This is more than 2 CRWD/DDOGs, and ~half of ZM. Its pretty crazy valuation. I will be waiting.

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This gives a trailing P/S of 162x and forward P/S >65x. If growth doesn’t remain stable above 120% for at least 2 more years. It is going to be a long time before people buying at $235 see any return IMO

bnh91

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This gives a trailing P/S of 162x and forward P/S >65x. If growth doesn’t remain stable above 120% for at least 2 more years. It is going to be a long time before people buying at $235 see any return IMO

Well, it only took a few minutes for those who bought at $235 to see a 24% return (hit $291 so far…)

80x forward revenue for an unprofitable company, vs. Zoom selling for ~50x current year revenues and making a profit.

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IRDoc,

I was more referencing long term returns 1-2 years out and not mid-day swings. Stock is already back near where it opened at $240. The SNOW valuation at $240 makes ZM look like a cheap stock. It is pure FOMO right now.

Bnh

Sooo… can we now agree that it is sometimes ok to “wait for a dip”? :wink:

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