Snowflake IPO - To Buy or Not To Buy?| North Loop Official Blog
North Loop Logo
North Loop
06 Oct 2020

Snowflake IPO - To Buy or Not To Buy?

thumbnail for Snowflake IPO - To Buy or Not To Buy?
Credit: North Loop

IPOs that double on their first day may seem like a big deal, but do you know what analysts have to say about it?
Well, a study of IPOs showed that the shares of around 68% of the companies that get listed perform better on their first day, compared with their returns over one year. This IPO pop can be rewarding for the short-term investors and traders because of the initial hype around a new listing, but if you are a long investor, you may get left with little on the table. But it is also a fact that most underwriting bankers advocate for a large pop, as the lack of the same can be a signal of weak demand amongst new investors.

Many researchers believe that the first day of trading is often very different from the company’s long term performance and IPOs sometimes can have zero relevance to long-term opportunity. So should you be cautious when investing in Snowflake? There is no straightforward answer to this question because it depends on a variety of factors and investment philosophies. IPOs can create tremendous value and become an immense achievement for a young company. However, that being said, the strategic pricing of the IPO plays a huge factor.

Also, if the Snowflake IPO has left you intrigued, you should know that this year there have been plenty of companies with a first-day pop bigger than that of Snowflake. The common factor between all of them is that they are tech or biotech firms. Some of these include biotech firm CureVac, BigCommerce, Berkeley Lights, Lemonade and others. While CureVac went up 249% on its first day of trading, software firm BigCommerce reported 201%, biotech firm Berkeley Lights 197% and cloud company nCino 195%. The insurance fintech firm Lemonade went up 139% on its first day of trading. This trend shows a higher degree of risk appetite among people that makes them willing to pay more.

IPOs with big first-day pops:

Company Name IPO Pop Percentage
CureVac249% (biotech)
BigCommerce201% (software)
Berkeley Lights 197% (biotech)
nCino195% (cloud)
Lemonade139% (fintech)
Vroom118% (tech)
Agora153% (tech)
Black Diamond 108% (biotech)

Start investing for free with North Loop and get personalized recommendations

However, the high-flying IPOs and big pops have not necessarily meant high returns for many of these companies. Analysts have reported that the post-first-day returns of these companies have not been encouraging with some of them that popped more than 100% on the first day recording an average negative 1% return from the first day close.

With the statistics of this year’s big IPO pops and negative future returns, it is normal to be confused about investing in much-hyped Snowflake. The best course of action would be to analyse and research whether the stock fits in your investing strategy or not. Buying the stock merely because most others are doing it would not be a wise decision. It is crucial to determine and evaluate your long-term financial goals and then take decisions with caution. Experts always suggest that you should understand the company’s product, competitive advantages, growth and market prospects clearly before investing in it.

As analysts have researched, getting inspired to buy high flyers because of their first-day returns can sometimes lead to a setback. The first day IPO pop may be notably higher than usual, but it can in no way guarantee positive future returns. A lot depends on the pricing strategy and various internal and external factors. Analysts suggest to beware and be cautious.

However, if you think that the investment can become a multi-bagger and Snowflake’s sky-high valuation and growth rates are worth the risk, you can invest in this cloud data perform. One of the best ways for you to do so is through a digital platform like North Loop. You can sign up, open an account and start investing with just a few clicks. Click here to read more about investing in the US stock market.

How to invest in Snowflake through North Loop –

Download the App from App store/Play store
Sign up on North Loop
Open an account on the App
Deposit money into your account
Start investing!
(You can even opt to invest in fractional shares)
To invest in Snowflake with North Loop, sign up here.

Save money with

No-fee banking, investments, remittances & insurance for the global Indian

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.