Dropbox IPO priced higher than expected on strong demand

Saul Franklin
March 26, 2018

Having topped expectations with the upsized price of its initial public offering, Dropbox Inc on Friday faces its next big challenge: a successful launch of trading when global stock markets are on the defensive and tech shares are particularly soft. With the first day of trading underway, the Dropbox IPO is off to a healthy start, as stock prices climb over 40 percent. That appeared to drag down the industry altogether, with Google and Apple having fallen about 7 percent this month. Dropbox, which raised $756 million in the largest tech IPO since Snap previous year, will trade on the NASDAQ under the ticker "DBX". Originally, the company expected to raise $756 million, in addition to Salesforce.com Inc.'s $100 million investment through a private placement.

Dropbox shares soared as much as 48 percent to $31 at 11:37 a.m.in NY, giving the company a market value of $11.9 billion.

The initial public offering was the biggest in the technology sector since Snapchat's in 2017 and is among the few "unicorns" - venture-funded startups worth more than US$1 billion - to go public. Over the years we've seen plenty of tech firms take their companies public (with varying degrees of success), and it was just about this time last year when we witnessed Snap start its IPO with a bang-even if today's price is now below where it started.

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

Like Snap, Dropbox warned prospective investors that it may never be profitable. It has an attractive story to justify its need for financing and the market dynamics are good. 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 company was hacked in 2012, and more than 68 million users' emails and passwords were leaked on the internet four years later. As a public company Dropbox will be under pressure to quickly trim its losses. Its net loss almost halved from $210.2 million in 2016.

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