Berkshire Hathaway invests in a tech IPO

Snowflake’s amended S-1 this week raised eyebrows for a few reasons. One was its huge valuation: Its proposed price range values the company at up to $23.7 billion, way higher than the $12.4 billion it was valued at in February. And then there was the name of an investor that’s already committed to buying shares: Berkshire Hathaway.

• Warren Buffett’s investment vehicle agreed to buy around $250 million worth of shares in the IPO, and will buy a further $320 million from former Snowflake CEO Robert Muglia.
• Berkshire’s an unusual investor for a deal like this. Buffett has publicly decried IPO investing, and has mostly avoided tech investments, citing them as outside his circle of competence. (Apart from Apple; Buffet really loves Apple.)

So is this a big shift in the company’s strategy? I spoke to some Berkshire-watchers to find out.

One thing to note: “This really isn’t Buffett, you know, ‘old dog, new tricks,'” Edward Jones analyst James Shanahan said. “This is the influence of his investment managers.” That’s Todd Combs and Ted Weschler, and indeed it was Combs’ signature on the Snowflake document, not Buffett’s.

• Combs was also behind Berkshire’s only other IPO investment, in fintech StoneCo. He and Weschler have autonomy over small parts of the portfolio, and in an effort to beat the market, they’re pursuing the tech investments that Buffett’s typically avoided. “You just simply can’t outperform without tech in the portfolio,” Shanahan said.
• “What we’re seeing … [is] a realization that in order to outperform the market, they can’t ignore the largest sector in the market,” Cathy Seifert, of investment research firm CFRA, said. “In some respects, Berkshire’s playing catch-up here.”

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