Silicon Valley darling Dropbox Inc. is aiming to go public at a valuation well below the $10 billion it clocked in its last private funding round, despite posting healthy revenue growth and turning cash-flow positive in the intervening four years.
The file-sharing company is targeting a public market capitalization of $6.3 billion to $7.1 billion in its initial public offering, according to a filing Monday. Including restricted stock units, that range is $6.7 billion to $7.6 billion.
The company is one of a class of well-funded, closely-watched technology companies that have achieved a private valuation of more than $1 billion. Investors wanting to get their hands on the next big thing piled into these so-called unicorns in recent years, helping drive up valuations.
The gap between private valuations and public market aspirations highlights the disconnect between the premium that private investors put on potential innovation, and the financials-based analysis that public market shareholders are focused on.
Snap, Blue Apron
This year has seen an early surge in public offerings with $8 billion of new stock sold in the U.S. in January alone, the biggest month since Alibaba raised $25 billion in its September 2014 IPO, according to data compiled by Bloomberg. Still, listing flops in 2017 from Snap Inc. and Blue Apron Holdings Inc. –- who have both traded below their last private valuation — are fresh in investors’ memories.
San Francisco-based Dropbox is aiming to raise as much as $648 million in its U.S. IPO, marketing 36 million shares of Class A common stock for $16 to $18 apiece, according to the filing with the U.S. Securities and Exchange Commission. At the high end of its offering size, it’d be the third-biggest U.S. IPO from an enterprise technology company in the past three years, according to data compiled by Bloomberg.
Dropbox also agreed to sell $100 million in stock to Salesforce.com Inc.’s venture capital arm in a private placement concurrent with the IPO, the filing shows. Last week, the companies announced a partnership to integrate and sell Salesforce’s customer relationship management technology with Dropbox’s storage and collaboration tools.
Chief Executive Officer and co-founder Drew Houston will hold 22 percent of the shares outstanding after the offering, or 24 percent of the voting power, according to the filing. Arash Ferdowsi, co-founder and director, will hold 8.8 percent of the shares.
The pair started Dropbox in 2007. Sequoia Capital, one of Dropbox’s early investors, will own a 21.1 percent stake.
Dropbox company has touted its business as a path to unleashing creative energy and inspired work. Dropbox says it has more than 500 million registered users, with 11 million of those paying for added features.
While the company is inching closer to profitability, Dropbox outlined in its deal prospectus its focus to get more of those users to pay up. Investors are sure to have questions for the file-sharing technology leader as it embarks on its marketing roadshow.
The company’s revenue increased more 30 percent last year to $1.1 billion from $845 million in 2016. In the same period, the company’s net losses shrank to $112 million from $210 million.
Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Allen & Co. are leading the offering. The company plans to list on Nasdaq Global Select Market under the symbol DBX.