Warren Buffett's Berkshire Hathaway plans to plow $570 million into Snowflake. Its last IPO bet has gained 110% in 2 years

REUTERS/Rick Wilking

  • Warren Buffett’s Berkshire Hathaway is set to bet roughly $US570 million on Snowflake when it goes public, despite the billionaire investor’s aversion to loss-making tech companies, high valuations, and IPOs.
  • Buffett’s company may be backing Snowflake partly because its last IPO bet paid off.
  • Berkshire invested $US340 million in Brazilian fintech StoneCo when it went public two years ago, and its stake has more than doubled in value since then.
  • StoneCo was also unprofitable in the year before its IPO, but it posted $US147 million in net income last year.
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Warren Buffett’s Berkshire Hathaway plans to plow about $US570 million into Snowflake when the cloud-data platform goes public, despite the famed investor’s public disdain for loss-making tech companies, initial public offerings, and sky-high valuations.

The conglomerate’s successful investment in StoneCo‘s IPO may partly explain the decision. Berkshire spent $US340 million to buy 14.2 million shares at the IPO price of $US24, giving it an 11.3% stake in the Brazilian e-commerce and digital-payments company at the time.

StoneCo’s stock price has more than doubled to over $US50 since then, boosting the value of Berkshire’s stake to $US718 million at the close of trading on Wednesday.

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Berkshire will be hoping Snowflake, which lost $US349 million in its last fiscal year, follows StoneCo’s financial trajectory as well.

The Brazilian fintech more than tripled its revenues between 2017 and 2019, and went from being unprofitable in the year before its IPO to generating $US147 million in net income two years later.

Buffett’s company got a taste of IPO investing and the potential for quick and easy gains with StoneCo. It may be back for another bite with Snowflake.

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