Snowflake Shares Melt Ahead of Lockup Expiration

The cloud service provider slides prior to a lockup expiration that comes just three months after its debut.
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Snowflake  (SNOW) - Get Report share were falling Monday prior to a lockup expiration on Tuesday that will give insiders their first opportunity to cash out since the cloud service provider went public in September.

Shares of the San Mateo, Calif.-based company were down 6.09% to $332.40 at last check.

Snowflake’s lockup expiration comes just three months after its debut, half the length that is typical following an IPO, Bloomberg reported. Of the 22 analysts covering the company, less than half recommend buying the stock.

Last week, Snowflake shares fell sharply after Deutsche Bank analyst Patrick Colville downgraded the cloud service provider to hold from buy. "Winter is coming," as the stock has soared in recent days without its fundamentals changing, he wrote in a report.

The stock’s potential “may be limited as we wrap up 2020 and investors look to protect their year,” the analyst said.

To be sure, looking longer-term, Snowflake is “in the sweet spot for key secular trends of this decade,” he said.

"The expiry of the lockup could weigh on share price accretion from here, as early holders sell and SNOW's free float rises from 32.2 million to 345.8 million shares in March 2021," Colville said. 

In September Snowflake kicked off trading at $245 a share, more than double its already lifted initial public offering price of $120, solidifying it as the largest software-focused IPO ever. 

Snowflake originally set a midpoint range of $80 a share, but raised it to a midpoint of $105.

Earlier this month, news of stronger-than-expected third-quarter sales sparked price-target increases by analysts.

Snowflake reported better-than-expected third-quarter sales of $159.6 million, up 115% from a year ago and above analysts’ forecasts of $147.5 million. However, the company posted a per-share loss of $1.01, wider than analysts’ forecasts that called for a loss of 26 cents.