Dropbox Shares Soar as Much as 48% in Market Debut

Nichole Vega
March 25, 2018

At an unpredictable time for tech companies and social media giants, California-based tech unicorn Dropbox looks to be entering a higher gear, following a better-than-expected IPO posting.

The IPO raised $756 million, pricing 36 million shares at 21 apiece Thursday evening, above an upwardly revised price range of 18 to 20. That's higher than the $10 billion valuation that Dropbox fetched in a 2014 private funding round, and allays any concerns related to the negative optics of Dropbox going public at a lower valuation (a downround IPO).

Dropbox surged by as much as 44% in its trading debut on Friday, marking a strong start to the most prominent tech initial public offering so far in 2018. For DropBox's cloud storage, it will run you $120 per year for 1TB.

The company has yet to turn a profit, but its revenues have grown rapidly over the past few years from $603 million in 2015 to over $1 billion in 2017.

Founded in 2007 by two Massachusetts Institute of Technology computer science students, Drew Houston and Arash Ferdowsi, Dropbox sells software subscriptions that let users collaborate and share files online.

The tech company declared itself cash-flow positive in 2016. Based on the company's opening price, Dropbox had a market valuation of approximately $12.69 billion.

The initial price range was quite conservative compared to the ratings of comparable companies, according to the analysts. To branch out the business scope beyond simple file storage, Dropbox has developed new services such as Showcase, Smart Sync, and collaboration tools such as Dropbox Paper. For example, Andrew Houston, the co-founder and CEO, will have 24% of the company, while the the venture-capital firm Sequoia Capital will own a 25% stake. Its net loss, however, was almost halved, to $111.7 million.

"If investors had bought Dropbox stock within the last six months, they'd be up over 75 percent". The company can also boast $1.1 billion in revenue with 11 million paying users.

The underwriters for the offering are Goldman Sachs, JPMorgan, Deutsche Bank, Allen, Merrill Lynch, RBC Capital Markets, Jefferies, Macquarie Capital, Canaccord Genuity, JMP Securities, KeyBanc Capital Markets and Piper Jaffray.

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