Can the Dropbox IPO revive the technology sector?

Noel Cummings
March 26, 2018

Spotify is valued at about $19 billion in the private market, while Dropbox's market valuation climbed toward $13 billion in the day following the IPO.

Dropbox is the biggest so-called unicorn since Snap to test the public market's appetite for tech startups.

Dropbox's expected range was $18 per share to $20 per share, which was was up two dollars a share from the company's earlier estimate of $16 per share to $18 per share. The stock opened at $29 and closed at $28.48, up 36%, giving the company a valuation of $11.03 billion. Dropbox's IPO was one of the more high anticipated ones in 2018, after the company filed for a confidential IPO back in January. The biggest and most recent example of such an IPO was Snap a year ago. There's a school of thought that IPOs should try to avoid that vaunted first-day bump by getting as much money as they can from the initial price, but everybody likes to see those green numbers on their stock tracking service of choice, and that's what Dropbox shareholders got Friday morning.

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Uber, the most valuable private tech company, is not expected to go public until next year.

The company says more than 90% of Dropbox's revenue comes from individual users purchasing subscriptions.

The IPO raised about $756 million in the largest tech IPO since Snap Inc raised $3.9 billion in its debut previous year. Its full-year net loss almost halved from the $210.2 million in 2016. analyst Tom Taulli suggests that "in the case of Dropbox, investors get a chance to get exposure to a next-generation tech company, which is a proven business model".

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Dropbox also warned that data and security breaches could hurt its ability to keep customers or attract new ones.

Dropbox has a dual-class stock structure that gives outsized power to some insiders. For example, Drew Houston, the cofounder and CEO, will control 24% of the company, while the venture-capital firm Sequoia Capital will own a 25% stake.

Dropbox shares are set to start trading Friday under the symbol DBX.

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