Dropbox raised the price range for its IPO

Terry Joseph
March 24, 2018

Hours before its 11.35 am debut on the Nasdaq, the company had announced an IPO price of $21 a share. This is up nearly 36 percent.

After initially targeting a market value of only $7.1 billion, strong demand for Dropbox shares helped close the gap as its IPO priced above the marketed range. At the stock's opening price, the company touched a market valuation of $US12.67 billion ($A16.4 billion), above the $US10 billion valuation it had in its last private funding round. It is not losing out to rivals yet; revenues grew by a third past year. Its net loss, however, was almost halved, to $111.7 million. But it has significantly improved margins when compared to losses of $210 million for 2016 and $326 million for 2015.

The company boasts 500 million users but among that count, only 11 million are paying for the premium service.

Shortly after, Houston pitched his idea to Paul Graham of Y Combinator, a venture capital company that provides seed money to startups (Y Combinator has also invested in companies like Airbnb, Reddit, and Coinbase, among many others). If anything, Dropbox's time in the spotlight through the good and bad has given it an appreciation for the intense scrutiny of public markets. We have footage of that here.

Accel was the next largest shareholder, owning 5 percent overall.

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Investors' comfort with Dropbox's books could help it avoid a flame-out like Blue Apron Holdings.

Despite the size of the offering, co-founder Drew Houston (pictured) isn't losing much control to public investors.

Of course, these IPOs are such exciting times for investors that they can (and often do) get a little carried away with themselves, and in the weeks and months that follow we could see the market correct that price down to a more stable figure.

Over the past few years, Dropbox has faced intense competition from tech giants such as Alphabet Inc.'s Google and Apple Inc., which have pushed into the consumer-storage space. Dropbox's price-to-sales ratio is about double that of Box, higher than that of Salesforce and in the territory of Workday, which tends to have a rich valuation in its category. Dropbox has also mentioned Atlassian as one of its main competitors in the area of worker collaboration. While the products are similar, the two have different business models and Dropbox was hoping that this would be respected with a better revenue multiple.

Such first-day pops aren't uncommon. Dropbox would trade under the ticker "DBX". Dropbox doesn't have this worry after its debut. We were joined by Eric Kim, managing partner at Goodwater Capital.

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