While the IPO market overall has rebounded a bit, it still remains a desert for tech companies. For the last few years there was always at least one major tech IPO every year to look forward to, be it Facebook in 2012, Twitter in 2013, Alibaba in 2014 or Fitbit in 2015. This year, so far there's been nearly nothing, with only three startups having going public, including Twilio, SecureWorks and Line (though we could be getting Spotify later this year),
Perhaps it's time to start looking ahead to 2017, where there are already signs of one major company that has been long talked about as a potential IPO candidate finally taking the plunge.
Dropbox has already met with advisers to discuss the possibility of an initial public offering as soon as next year, according to a report out from Bloomberg on Monday. Dropbox is said to have been the one to initiate those meetings.
In a way, this is a little surprising, considering that, just two months ago, CEO Drew Houston, speaking at Bloomberg’s Technology Conference, seemed fine with putting off an IPO for as long as he could, implying that was in no rush to take the company to the public market.
"We can go public on our own timeline," he said at the time, noting that Dropbox is cash-flow positive, which “means you control your destiny. Instead of being funded by your investors, you’re funded by your customers.”
That tune seems to have changed rather quickly.
Dropbox vs. Box
To get a sense of how Dropbox might do on the public market, there's probably no better corollary than its closest rival: Box.
When comparing the two, Dropbox has the edge when it comes the number of people actually using its service.
In March, Dropbox revealed that it had 500 million users. At the time of its IPO, Box had only 25 million registered users, a mere 5 percent of what Dropbox has currently. Box also had 34,000 paying organizations, while Dropbox had 150,000 paying business customers as of November, 50,000 of which joined in 2015 alone.
Box, however, had one clear advantage: the company was seeing over 2.5 billion content interactions every three months, or 10 billion a year. Dropbox users, on the other hand, have created just 3.3 billion connections since the company was founded in 2007. While that is a 51 percent increase in the last year, it's still far less than what Box was seeing.
One thing that Dropbox should really be worried about is its valuation, something that Box struggled with also. It lost 31 percent of its $2.4 billion valuation, which it received after raising $150 million in 2014, going public at $1.65 billion.
The last time Dropbox raised funding was a $350 million round in early 2014, which valued it at $10 billion. Since then, a number of its investors have cut their estimates. That includes BlackRock, which had led that $350 million round, which cut its estimate of the company’s per-share value by 24 percent. T. Rowe Price marked down its valuation by 51 percent, and Fidelity by around 30 percent.
After Box went public, investors balked at its underperforming earnings, as well as big shareholder sell offs, and the company saw its stock crumble. The company went public at $14 per share, went up to $23 on the first day of trading, but lost 40 percent of its value in the following months.
Box's stock price fell below $20 a share in mid-February, only a month after it debuted, getting back to that level one time, in mid-March. It hit a low of $9.12 a share in February of this year, and while it has since bounced back a bit, the stock ended trading on Monday at $12.81 a share, it is still down over 8.24 percent year-to-date.
Obviously that doesn't mean the same thing would happen to Dropbox if it did go public, but that the fact that the company it so closely resembles has been struggling has to be giving it at least some pause.
VatorNews reached out to Dropbox for confirmation of this report, but the company had no comment.
(Image source: stocksprediction.com)