Why It's Unlikely Warren Buffett Is Actually Investing In Snowflake

Legendary Wall Street investor Warren Buffett has long been skeptical of big-name IPOs. That's why some Buffett followers were surprised to see Buffett’s Berkshire Hathaway Inc (NYSE: BRK-A) (NYSE: BRK-B) invest $550 million in the upcoming Snowflake IPO.

However, experts familiar with Buffett’s investing philosophy say the Snowflake investment may not be what it seems.

New filings this week revealed that Berkshire is taking a $250 million stake in Snowflake at the IPO price in a secondary offering and is also buying another 4.04 million shares of Snowflake from a current investor in a secondary deal. At the midpoint of the expected IPO price range of $80 per share, Berkshire’s stake will be worth roughly $550 million.

Passing On Uber: Buffett has famously shied away from both tech stocks and IPOs. When asked about the high-profile Uber Technologies Inc. UBER IPO last year, Buffett said he hasn’t ever invested in an IPO in his 54 years on Wall Street.

“The idea of saying the best place in the world I could put my money is something where all the selling incentives are there, commissions are higher, the animal spirits are rising, that that’s going to better than 1,000 other things I could buy where there is no similar enthusiasm… just doesn’t make any sense,” Buffett said.

Despite the headlines surrounding Berkshire’s Snowflake investment, Whitney Tilson said this week that Berkshire’s relatively modest position is likely not a sign that he has changed his philosophy on IPOs.

“Rather, it was likely initiated by executives Todd Combs or Ted Weschler (I'd guess Combs), who will eventually replace Buffett in managing Berkshire's enormous investment portfolio,” Tilson said.

Berkshire Evolving: In fact, Buffett also said last year that “one of the fellows in the office” was responsible for Berkshire’s first ever investment in Amazon.com, Inc. AMZN, likely referring to either Combs or Weschler.

“Both are more comfortable investing in the tech sector – and Buffett certainly isn't going to second guess them, especially for such a small investment. $600 million is a drop in the ocean of Berkshire's stock holdings, which were valued at $207 billion at the end of the second quarter,” Tilson said.

Benzinga’s Take: Buffett’s value investing approach has often led to him missing out on trendy stocks on Wall Street, but his long-term success is proof that slow and steady wins the race. In fact, 16 months after Uber’s massive IPO, the stock is still down 18.4% from its IPO price.

Related Links:
The So-Called 'Buffett Indicator' Hits All-Time High
Is Buffett Selling Banks, Buying Gold A Warning Sign For Investors?

Posted In: SnowflakeWarren BuffettWhitney TilsonAnalyst ColorNewsIPOsTop StoriesAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.