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A Databricks IPO stands on the horizon. And as the company takes its sweet time getting to market, it's not too early to learn all you can about Databricks stock.
This company could go public any time in 2022. It's one of the highest-valued private companies in existence, at $38 billion, and it's slowly drawing in long-term investors to pull the trigger on an IPO.
Databricks is drawing comparisons to Snowflake Inc. (NYSE: SNOW). Snowflake became the largest software IPO in history when it went public in 2020.
Long story short, if people think Databricks could do something similar, this is one to watch. You want to get ahead of this thing sooner than later.
Snowflake made a 104% for early investors after shares soared from $120 to $245.
But before you pull out your wallet, here's what you should know about the stock.
What Is Databricks?
Databricks' first product, the Apache Spark, gained notoriety as a top open-source analytics engine. It got popular enough that the company continues to offer courses and conferences for the software.
Now, Databricks is known for a wide range of open-source data engineering and machine-learning tools. One major product - again, Spark-related - is a web-based platform for using the engine.
And people love Databricks software. The company has over 5,000 users worldwide.
But what sets Databricks apart more than anything right now in the tech world is its software architecture. The model is called "lakehouse" and makes it easier for companies to update data systems without starting from scratch.
Teams can update the systems through cloud collaboration, saving plenty of hours and money for their enterprise.
Building on wild success, the company continues to raise funds and grow its investor base.
While a Databricks IPO date is yet to be confirmed, founder Ali Ghodsi has repeatedly said the company is making preparations.
They're taking steps, slowly but surely. But when the time comes, it will go by like a flash.
Here's what you should be ready for as we wait for Databricks to go public.
Will We Get a Databricks IPO or Direct Listing?
Ghodsi previously told CNBC that "all options are on the table" with regard to its public offering, direct listing included.
A direct listing would take the company public faster and avoid underwriting fees and advertising expenses.
More recently, though, it's begun to sound more like an IPO is in the cards. Ghodsi told Protocol in August 2021 that the Databricks is "going public six months at a time. By that, he means they're taking the necessary steps before filing, which right now means allocating shares to long-term investors slowly over time.
It's still not certain which route Databricks will take. Startups often need underwriters to help broaden their investor base, and Databricks appears to be doing that independently and growing its market cap just fine.
Still, Databricks could also benefit from the branding exposure granted by a traditional IPO.
Which route it takes is anybody's guess. But either way, it could be a bigger opportunity than Snowflake...
Is Databricks Stock a Buy?
Enterprise software is a massive industry. Now, especially with hybrid organizations - some people work from home, some full-time office workers, some half - businesses need more and better software.
That explains how the market responds to companies like Snowflake. Retail investors can foresee the importance of computing infrastructure.
Data from Statista suggests that the global enterprise software market could reach as high as $517 billion, and IT spending could be as high as $4.07 trillion in the coming years.
And while Snowflake was the biggest software IPO in history thus far, Databricks could be an even bigger opportunity to capture this industry growth.
That's because retail investors have more of an opportunity to buy shares than with Snowflake.
When Snowflake went public, Robinhood's IPO Access platform was not yet around. But since last year, the company is offering shares of IPO stocks for the first time.
This gives retail investors a rare chance to buy stocks at IPO prices.
If Databricks decides to IPO and its stock shows up on Robinhood, insiders will no longer have the privilege of buying shares ahead of the crowds.
Snowflake shares more than doubled for those insiders, and now Databricks could do the same for others.
Another bonus is that, while stocks often crash after getting pumped by insiders early, Databricks is a successful company in a thriving industry. Shares are less likely to crash.
For now, Databricks continues to invest in growth and innovation, focusing on building out its data and AI stacks.
And it's getting the investor power to do it. Its top funders include Amazon Web Services, Salesforce, and Microsoft.
When the top enterprise software companies are also your top investors, you might be a top enterprise software company.
Basically, everyone in the tech world wants to buy Databricks stock. And you should, too.
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.