Published: Sun, March 25, 2018
Money | By Hannah Jacobs

Can the Dropbox IPO revive the technology sector?

Can the Dropbox IPO revive the technology sector?

The question is whether the hot demand that drove up its IPO price underpins a strong bid for its shares on a day when US equity index futures signal another rough trading session. That appeared to drag down the industry altogether, with Google and Apple having fallen about 7 percent this month.

Dropbox Inc (DBX.O), the cloud storage software company will make NASDAQ market debut with a price of $21 per share. Now, it's up to Dropbox and Spotify to prove that investors still believe in the lofty valuations of new tech companies. The payments company raised less than expected to clock a market value of $2.9 billion, well below the $6 billion valuation it reached in a private funding round just a year earlier. The San Francisco-based company is cash-flow positive and edging toward a net profit, while showing revenue growth of more than 30 percent a year ago to $1.1 billion, according to its latest pre-IPO filing.

The $756M IPO had 36M shares priced at $21 yesterday. But for the moment, at least, Dropbox is off to a very respectable start, and has investors talking positively about tech IPOs again.

The last big unicorn to go public was Snapchat-owner Snap Inc, whose shares have cratered since the company's high-profile IPO a year ago. The stock opened at $29 and closed at $28.48, up 36%, giving the company a valuation of $11.03 billion. Although the paying user base is small, Dropbox forecasts that out of the 500 million, 300 million users are more likely to become paying users in the future due to their characteristics such as email domains, devices and geographic attributes.

Dropbox now has over 500 million registered users across 180 countries, but only 11 million of those users are paying.

"We've always lived in a competitive environment. and importantly all our growth has happened in that environment", Houston said.

Arash Ferdowsi is a co-founder of Dropbox Inc. The company will list directly on the New York Stock Exchange under the ticker symbol SPOT, removing the underwriters from setting an initial price, linking sellers and buyers and providing cash to stabilize the stock.

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