Why Snowflake Burned IPO Investors

Welcome to StockUp, the investing newsletter that's ready for sweater weather. -------------------------------------------------------------------------------------------------- [View this email in your browser]( Welcome to StockUp, the investing newsletter that's ready for sweater weather. This week, why chasing the latest red-hot IPO left some investors frostbitten (at least in the short run). Plus, the forecast that's giving the oil sector a serious case of the heebie-jeebies, and the complicated truth about Social Security and immigration. — Nathan Alderman, StockUp Editor THE BIG CHILL Why Snowflake Burned IPO Investors --------------------------------------------------------------- Once upon a time, a little data warehousing company called Snowflake (NYSE: SNOW) announced its intention to go public. It priced its shares between $75 and $85 — about 48 times trailing sales, a not-too-shabby valuation for a promising tech stock. And then Warren Buffett showed up and ruined everything. Fine, that's not entirely fair. Buffett's lieutenant [Todd Combs was the real driving force]( behind Berkshire Hathaway's (NYSE: BRK-A)(NYSE: BRK-B) decision to sink more than $500 million into this particular snow bank. But in the process, Berkshire's interest jacked the expected share price up by roughly 50%, to $120. Okay, [it's still good, it's still good](. But then more and more investors took notice, and the stock started to — you knew this was coming — snowball. And by the time it finally hit the market, after the big banks and early investors had had their first go at the shares, individual investors were offered brand-new Snowflake shares for the low, low price of ... $245?! Wait, it gets worse! Snowflake rose less than 4% on its first day of trading. And then, like many IPOs, shares began to fall. As we type this, they're trading slightly below their IPO price, and that's after a slight rebound. Berkshire and the other investors who got in before the hoi polloi still walked away with huge truckloads of on-paper gains. But the retail investors who piled in after them ended up empty-handed, at least in the short term. Snowflake may well have a bright future in the long term, but like most "red-hot" IPOs, it made a lousy way for individuals like you to get rich quick. Fool Rich Smith got snowed, the same as everyone else, and he's found three good lessons to take away from this IPO and any future offerings like it. Discover his hard-won wisdom when [you read the rest](. --------------------------------------------------------------- Already subscribed to a premium service? [Click here]( to view your subscriptions. Not a member yet? [Click here]( to sign up! --------------------------------------------------------------- SNEAK PEAK This Forecast Will Send Shivers Across the Oil Patch We used to worry about "peak oil" — the idea that global demand for fossil fuels would outstrip our ability to produce the stuff, sending energy prices into the stratosphere. But as Fool Matt DiLallo reports, two unexpected developments have turned that notion on its head. Now, with the COVID-19 pandemic drying up consumers' thirst for oil, and renewable energy sources getting far cheaper, far faster than expected, the oil sector must contend with an entirely different and, for it, far more frightening possibility: peak demand. That's the future BP (NYSE: BP) foresees, and it's planning accordingly. It's mapped out three hypothetical scenarios stretching out to 2050, and all of them show renewable sources dethroning King Oil as the world's leading energy provider. Under the best scenario BP envisions, demand might drift a liiiiittle higher for a while, driven by industrial uses, but passenger cars, trucks, and buses are a lost cause. Even then, consumption drops 10% in the next three decades. The other two scenarios get grimmer and grimmer, demand-wise, with daily oil consumption plunging between 50% and 80% over the next 30 years. That's great news for the climate and the planet, but decidedly less so for companies that make their money off compressed dinosaur juice. (For all you pedants out there, yes, OK, we know fossil fuels more likely come from the remains of long-dead bacteria and plants. Indulge us a little poetic license, if you would.) So what's BP doing about this vision of the future? Following the money, of course, with plans to cut oil production and redirect its dollars into more renewable energy projects. It's aiming for an eightfold increase in its solar and wind generation capacity over just the next five years. To learn more about BP's plans for a cleaner, greener future — and what they might portend for the oil industry as a whole — [read the rest](. --------------------------------------------------------------- ALEXA, TELL ME THE ELDRITCH SECRETS OF THE PUMPKIN SPICE [Smart Speaker] Not sure what to ask your smart speaker? Keep up with what's happening in the market by asking your Amazon Alexa or Google Home to "Play Motley Fool podcasts." --------------------------------------------------------------- E PLURIBUS UNUM The Truth About Social Security and Immigration Social Security has helped millions of older Americans stay financially afloat. Without it, according to one analysis, elder poverty rates in the U.S. would be more than four times higher. An April 2020 survey showed that 89% of retirees depend on their Social Security benefits to make ends meet. But Social Security's in long-term financial trouble, and as Fool Sean Williams reports, people are looking for someone, anyone, to blame. That proverbial finger often ends up pointing at immigrants, whether legal or undocumented. But based on the best facts we have available, cracking down on new arrivals to the United States would hurt Social Security, not help it. To stay afloat, Social Security needs lots and lots of new workers entering the U.S. workforce — more than the number who retire each year and start claiming their benefits. We make many of those new workers the, uh, old-fashioned way, right here in the U.S. of A. But deliveries from the stork can only get us so far toward meeting our quota of new members of the workforce. We need legal immigrants — who tend to be young, with decades of productive work ahead of them before they start claiming their own Social Security checks — to fill in the gap. To keep Social Security solvent, the folks who run it are relying on an average of 1.26 million new legal immigrants arriving on our shores each year. But over the most recent five-year period measured by the World Bank, from 2012 to 2017, fewer than 1 million people arrived each year. What about undocumented immigrants? They're often accused of siphoning off benefits without giving back — but the numbers strongly suggest that the opposite is true. Undocumented workers legally cannot receive a dime in Social Security benefits. Even if they use a fake Social Security number to get a job, they [rarely if ever claim benefits]( because doing so is a great way to get caught and deported. A relative handful of undocumented immigrants — mostly asylum seekers, who are legally entitled to ask for safe harbor in the U.S. — are eligible for Supplemental Security Income benefits, but while that's run by the same folks who oversee Social Security, it's a completely different program that gets its funding from completely different sources. By the Social Security Administration's own estimates, undocumented workers are a benefit to the program's bank account. When they use a fake or borrowed Social Security number to land a job, they're putting money into the system without taking it back out — to the tune of an estimated $13 billion as of 2013. That might not sound like much. But when you consider that in 2018 and 2019, Social Security ran a slim net cash surplus of $3.1 billion and $2.5 billion, you can see what a difference it makes. Learn more about the unexpected relationship between immigration and your future retirement income when you [read the rest](. --------------------------------------------------------------- NICE WORK IF YOU CAN GET IT FEATURED PODCAST [Motley Fool Answers]( What's Behind the Unemployment Numbers? We're joined by Dr. Rakesh Kochhar from the Pew Research Center to help us understand how the unemployment rate is calculated, how to dig into the numbers of the monthly Jobs Report, and the impact of COVID-19 on workers in the U.S. [Subscribe on iTunes]( --------------------------------------------------------------- JEEVES, DO RING UP MY BROKER Quick Reads - [There's an F. Scott Fitzgerald quote for this:]( 4 reasons you can't invest the same way ultra-wealthy people do. - [A big surprise from the Pentagon:]( What the Defense Department's unexpected new next-gen fighter could mean for aerospace stocks. - [They're coming to get you, cable!]( Why a horde of ad-supported streaming services could eat cable TV alive. --------------------------------------------------------------- NOBODY KNOWS ANYTHING Social Media Post of the Week [If 2020 has taught investors one thing, its that no one -- no one -- knows what the market will do in the short run. Worry only when you think you have it figured out.]( [See all our Instagram posts!]( Join the 1,300,000+ people who follow us! [Facebook]( [Twitter]( [Instagram]( [YouTube]( [LinkedIn]( We work fervently, fastidiously, and Foolishly to make sure all the facts and figures we publish in our emails are 100% accurate and up to date. Returns as of September 25, 2020. 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