Will the Databricks IPO Repeat Snowflake’s Magic?

Many U.S. tech companies have raised money from the public markets this year to capitalize on the massive investor appetite for tech and growth stocks. Reportedly, data analytics and cloud company Databricks is also thinking about listing. When is the Databricks IPO date and can it repeat the magic of Snowflake’s blockbuster listing? 

According to the company website, “Databricks brings together data engineering, science and analytics on an open, unified platform so data teams can collaborate and innovate faster.” Over 5,000 companies globally use the Databricks platform.

The company was founded in 2013 by a group of seven people that included four immigrants. The cofounders were the original creators of Delta Lake, ML Flow, and Apache Spark. Microsoft, Tiger Global, and BlackRock are among the company’s investors.

Spark is an open-source analytics engine for machine learning and big data. It was originally created at UC Berkley in 2009. With over 1,000 contributors, it boasts of the largest open-source communities in big data. Leading companies like Netflix, eBay, and Yahoo have deployed Spark.

There is some business overlap between Snowflake and Databricks. Snowflake is the largest IPO in 2020 and the biggest software IPO ever. Berkshire Hathaway, which has generally stayed away from IPOs and tech companies, also invested in the IPO along with Salesforce. The Snowflake IPO doubled on listing. However, the company is among the most expensive stocks based on the price-to-sales multiple.

IPOs have done well in 2020 and the Renaissance IPO ETF, which invests in newly listed U.S. companies, is outperforming the S&P 500 this year. Along with traditional listings, companies have looked at SPAC and direct listings to raise money.

Databricks hasn’t released its IPO date yet. However, it's expected to list in the first half of 2021. The company was last valued at $6.2 billion at its funding round in 2019. Snowflake priced its IPO at almost three times the valuation at which it raised money from private investors in February. Given the euphoria over tech stocks, Databricks might also look for a higher valuation than its private funding round. How the IPO performs will depend on the valuations and prevailing market sentiments.

This week, several companies including Root Insurance, Mavenir, Caliber Home Loans, Biodesix, and Media Alpha are coming up with their IPOs. Next week, there aren't any listings. Companies don’t want their listings to be the same week as the U.S. elections. U.S. stock markets could be volatile next week as markets digest the election results.