Snowflake (NYSE: SNOW) Channel Partner Executives Pumped Material Nonpublic Information About…

Snowflake (NYSE: SNOW) Channel Partner Executives Pumped Material Nonpublic Information About Snowflake’s Demise Ahead of Snowflake’s February Stock Collapse

Snowflake’s new CEO Sridhar Ramaswamy is powerless to stop Snowflake channel partners with access to Snowflake revenue patterns from making public material nonpublic information about Snowflake’s health. Snowflake relies too heavily on channel partners to spin Snowflake’s incremental revenue on Snowflake’s consumption model. I remain short the equity of Snowflake (NYSE: SNOW).

Background

1. Snowflake relies heavily on channel partners to spin Snowflake’s consumption revenue model. These channel partner tools include security applications, business intelligence and data visualization tools, ingestion or ETL tools, and transformation tools, among others. One major partner is dbt Labs, and another smaller one is Mode Analytics.
2. Each of these channel partner point solutions contributes to Snowflake consumption revenue in a variety of ways, such as by adding data to Snowflake storage, hitting Snowflake with queries and requiring compute resources to be used, etc. Collectively, Snowflake and channel partner solutions are referred to as “The Modern Data Stack” by Snowflake, by Snowflake employees, by many of these channel partners themselves, and by the general user and customer base.
3. Each of these channel partners tools not only contributes to Snowflake revenue, but each channel partner is able to see Snowflake consumption trends. Virtually all of these channel partners also work with various Snowflake competitor databases. For example, any product channel partner such as dbt Labs would know through its own data it collects if last year 10% of customers were Google Cloud BigQuery, 10% were Amazon Redshift, and 80% were Snowflake, but this year 30% comes from Google Cloud BigQuery, 30% from Amazon Redshift, and 40% from Snowflake, etc. These channel partners are able to see, close to real time, how data on the cloud moves through or is attributable to the hyperscalers and solutions such as Snowflake and Databricks, etc.
4. Snowflake’s stock price dropped over 18% on earnings on February 28, 2024 and has moved to a ~30% decline at this time of publication. This drop in the stock price occurred with announcement of the retirement of now former CEO Frank Slootman in addition to a hard downward guidance for the April quarter, with Snowflake guiding to product revenue of between $745 million and $750 million, below Street consensus at $768 million.
5. In the weeks leading up to the stock collapse, Snowflake partner dbt Labs’ CEO Tristan Handy and Snowflake partner Mode Analytics’ CTO Benn Stancil began a blitz across social media announcing the end of the “Modern Data Stack” built around Snowflake. Social media feeds for thousands of Snowflake customers and users were filled with Tristan Handy and Benn Stancil claiming the end of “The Modern Data Stack” across LinkedIn, X, widely distributed blog articles, and podcasts, occurring in the 2–3 weeks up to Snowflake’s stock crash.
6. In widely distributing these materials announcing “the end of the Modern Data Stack”, Snowflake partners Tristan Handy of dbt Labs and Benn Stancil of Mode Analytics, both of whom have access to Snowflake usage patterns and Snowflake competitor (Amazon Redshift, Google BigQuery) usage patterns while simultaneously creating incremental Snowflake revenue via their products, shared significant insider material nonpublic information about Snowflake’s health leading into Snowflake’s annual earnings results and the subsequent, immediate stock crash. In essence, Tristan Handy and Benn Stancil “called” the poor earnings results several weeks ahead of Snowflake’s earnings and disseminated this information through social media.
7. This egregious behavior is akin to any other channel partner, supplier, or buyer in any other industry sharing material nonpublic information about contract health with the general public without the permission of the other partner.
8. The United States Securities and Exchange Commission must investigate Benn Stancil and Tristan Handy for their roles in disseminating this insider information.
9. I do not believe new Snowflake CEO Sridhar Ramaswamy nor Snowflake management will be able to control his partners’ behavior. The Snowflake dog does not wag the partner tail; the partners wag the Snowflake dog. If partner founder executives like Tristan Handy and Benn Stancil wish to run amok on the internet making podcasts and blogs and promoting the “end of the Modern Data Stack” in a media blitz 2 weeks ahead of Snowflake’s poor earnings, Snowflake just has to acquiesce. Snowflake is mostly just a simple OLAP database for most customers, despite claims of being a “Data Cloud” and claims of AI.

What is The Modern Data Stack?

The Modern Data Stack is shorthand for Snowflake + all the partner product vendors a customer may plug into Snowflake.

Snowflake markets The Modern Data Stack concept directly themselves.

Snowflake even promotes a specific Modern Marketing Data Stack aimed at marketing analytics teams.

Snowflake even promotes a specific Modern Application Data Stack aimed at application development teams.

New Snowflake CEO Sridhar Ramaswamy has recently done videos about AI on the Modern Data Stack while still an SVP at Snowflake, including this linked video published February 21, 2024.

There are ample examples of this “Modern Data Stack” setup easily searchable. Most image searches will yield a number of names of vendors with arrows pointing into or out of a Snowflake database.

Each of these channel partners will add varying degrees of incremental consumption revenue to a customer’s Snowflake resources. A customer of Snowflake may mix-and-match various partners for ingesting data into Snowflake from outside applications, making different data tables within Snowflake, and making dashboards or pipelines out of the data warehouse into an application, thus making their data stack.

Snowflake’s Partners, Not Snowflake, Run The Show Around Snowflake Usage Patterns and Sharing Material Nonpublic Information about Snowflake vs. Snowflake Competitor Health to the Public

The cleanest and most real-time Snowflake insights into Snowflake usage are games their point solution partner CEOs play online to create engagement from “leaking” out special insights on social media as “how is Snowflake doing” insights.

At the most completely absurd level is Mode Analytics CTO Benn Stancil. Benn also has access to Snowflake and Snowflake competitor data through the usage of his product, Mode. He knows Mode’s customer base, how many Mode dashboards are in use at each user, what percent of Mode customers are with Snowflake vs. Redshift vs. Google BigQuery vs. any other underlying database, which customers may be moving off Snowflake to Redshift or Redshift to BigQuery, etc.

Benn Stancil has, for the past 3 years, played a keyword game with his popular weekly Friday afternoon blog to swing sentiment of how “The Modern Data Stack” around Snowflake is doing. He has killed and brought back the Modern Data Stack again and again, making forward-looking and predictive statements about Snowflake’s “Modern Data Stack” channel partner ecosystem while himself having access to consumption patterns about Snowflake usage at many customer accounts.

Nearly every Friday at around noon US Eastern time, before weekly or standard Snowflake options are set to expire, Benn releases absurd keyword tagged pieces either declaring something around the Modern Data Stack to be dead or alive or positive or negative. Benn’s blog posts are all filled with language indicating positive or negative sentiment, so whatever he’s talking about that week becomes popular or less popular and debated around the internet.

These get picked up by social media users, spread around social media as thought leadership, and distributed out to thousands of Snowflake and competitor users, within minutes of his posts.

Every few weeks it is up, down, up, down, up, down with Snowflake and the channel partner ecosystem. One week it’s backward-looking statements about how the “Modern Data Stack” is over, the next few weeks later it’s forward-looking statements about how Microsoft is adopting Snowflake’s model of the Modern Data Stack partner ecosystem.

Channel Partner Behavior Leading Up to Snowflake’s Stock Crash

Ahead of Snowflake’s February stock crash, Tristan Handy started the narrative that “The Modern Data Stack” channel partner ecosystem was over on February 11, 2024, from his dbt Labs blog, and this was shared out to thousands of Snowflake users via email and across social media. This was 17 days out from Snowflake’s earnings.

On Friday, February 16, 2024 Benn Stancil ran his blog about the end of The Modern Data Stack, and this was shared out to thousands of Snowflake users. This was 12 days out from Snowflake’s earnings.

On February 22, Tristan Handy appeared on the published podcast of venture capital firm FirstMark to speak about the death of the Modern Data Stack, and to refer to his article declaring this over. This was 6 days out from Snowflake’s earnings.

On February 25, Benn Stancil and Tristan Handy appeared on a podcast together called The end of the modern data stack w/ Benn Stancil, Mode on the dbt Labs official podcast. This was 3 days out from Snowflake’s earnings.

Thousands and thousands of Snowflake users, Snowflake competitor users, and anyone tangentially near Snowflake or the data engineering and analytics world on social media got absolutely blasted by the news that Benn Stancil and Tristan Handy were killing the Modern Data Stack for about 2–3 weeks before Snowflake’s earnings.

Many “data community” social media personalities picked it up since every other social media personality was also talking about it and it had been continuously pumped by dbt Labs’ Tristan Handy and related parties.

On February 29, 2024, after most of Snowflake’s user base was informed for 2 weeks prior that this ecosystem built around Snowflake is “over” according to two of Snowflake’s channel partners, Snowflake CEO Frank Slootman was out, Snowflake guided down, and the stock price crashed. The rest is history.

According to financial media, nobody could see this coming. However, this is because all of CNBC, Yahoo Finance, and most self-proclaimed financial gurus don’t know about the insider sharing of material nonpublic information from Snowflake’s partner Tristan Handy, of dbt Labs, and Benn Stancil, of Mode Analytics. These two individuals have the ability to move significant sentiment around as they see fit.

If you were paying attention, you’d have known that Benn Stancil and Tristan Handy, who have pumped the Snowflake “Modern Data Stack” for the last 3–4 years, all of a sudden finally declaring this dead once-and-for-all meant the stock would collapse.

• Both individuals have the usage patterns and growth patterns, especially Tristan Handy, as dbt is widely installed in the Snowflake user base
• Both individuals can look out and forecast Snowflake better than anyone outside of Snowflake
• Both individuals needed to stay ahead of a narrative when sentiment on Snowflake would turn sour

Snowflake CEO Sridhar Ramaswamy Is Tied From Taking Any Action About Channel Partners Screaming ‘Fire’ Immediately Before Snowflake’s Earnings

I do not believe new Snowflake CEO Sridhar Ramaswamy is capable of taking any action, or of being able to bring into control any of this “influencer” behavior.

Tristan Handy and Benn Stancil, in addition to George Fraser, the CEO of Snowflake channel partner Fivetran, run Snowflake, not the other way around. Unless Tristan Handy is sitting in a prison cell without access to a phone, Tristan will just continue indefinitely making influencer content online and stirring up Snowflake customers and leaking information about how Snowflake’s usage patterns trend for whatever narrative he wishes to tell, based on whatever internal forecasts he and his team are making.

Sridhar Ramaswamy is too busy selling AI vaporware, yet most of Snowflake’s revenue comes not from “AI” but from typical business intelligence, or BI, use cases as a traditional data warehouse. dbt Labs alone is a large driver of Snowflake consumption revenue, with Fivetran another major driver.

That Snowflake channel partners are permitted to run free sharing insider information about Snowflake usage patterns and making forward-looking statements ahead of Snowflake earnings and declaring the Snowflake/channel partner co-selling relationship of “The Modern Data Stack” to be “dead” and ended means Snowflake is not in control of the relationship.

The Myth That Snowflake is an Enterprise-Grade Solution Makes This Worse

Snowflake is not actually widely adopted nor meaningfully used by enterprise customers. It is mostly a solution for SMBs and tech/digital native companies.

Snowflake reports in filings and in investor materials the Number of Forbes Global 2000 Customers as a Key Business Metric and as a proxy of their penetration into “enterprise” customers.

In Snowflake’s most recent investor presentation released with their last earnings, Snowflake noted 691 of Forbes Global 2000 customers, and 461 customers with over $1M annual spend on Snowflake product revenue.

Additionally, Snowflake notes in the same documentation a 3,008 headcount of Sales & Marketing employees.

This begs the question:

• If Snowflake has only penetrated 691 of enterprise Forbes Global 2000 accounts, despite having a large GTM organization for many years now…
• and, if Snowflake has only 461 customers spending over $1M a year…
• and, if Snowflake has 3,008 Sales & Marketing employees…

…then what exactly are most of these Sales & Marketing employees doing other than taking part in Snowflake’s high stock-based compensation scheme? Clearly the largest accounts in the world are not adopting Snowflake nor spending nearly as much as Wall Street’s bull narrative may suggest.

Much of Snowflake’s growth is driven not by Snowflake GTM employees or Snowflake itself, but by its channel partners.

In fact, Snowflake product revenue is heavily influenced by aggressive customer usage of dbt Labs. This growth of dbt at customers, expressed as “models” or sequences of SQL queries run on a database, has grown exponentially, as shown by dbt Labs in this April 2019, 2023 article on their website.

If Snowflake is maintaining such a large GTM organization and not landing many new customers, then where is the growth coming from? Much is coming from channel partner dbt Labs, whose CEO Tristan Handy declared the co-marketed Snowflake channel partner ecosystem to be “dead” ahead of Snowflake’s poor earnings and stock crash.

Conclusion

The General Manager of Microsoft’s PowerBI product line does not get on podcasts and make blogs 2 weeks ahead of Microsoft earnings while making statements about Microsoft Azure forward-looking weaknesses.

The PepsiCo CEO does not get on podcasts and make blogs 2 weeks ahead of Wal-Mart earnings while making statements about about Wal-Mart forward-looking weaknesses.

Yet in the Snowflake ecosystem this is permitted.

I am short the equity of Snowflake as I believe Snowflake executive leadership has completely lost control of its revenue-driving channel partners. I believe there is overwhelming evidence showing that both Tristan Handy and Benn Stancil, who are in their capacities able to forecast Snowflake revenue consumption, inappropriately made public material nonpublic information and made forward-looking predictions about Snowflake’s channel partnership health (“The Modern Data Stack”) ahead of Snowflake’s February, 2024 stock crash, and that these actions directly contributed to a multi-billion dollar loss for Snowflake investors upon earnings release.

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This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. Lauren Balik does not represent the interests of any fund or of any investor other than herself. Past performance is not indicative of future results. This content speaks only as of the date published. Any projections, estimates, forecasts, targets, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.