Dropbox Inc. offered a price range for shares in its initial public offering that would value the cloud storage company at up to US$7.1 billion, nearly a third below the valuation it commanded in 2014, Reuters reports.
Dropbox is the largest tech IPO after a protracted dry spell, and investors are carefully watching it for signs of how other highly valued tech companies will be received by the public markets.
If Dropbox is a barometer for public market sentiment, it appears that investors will not endorse the valuations that many billion-dollar-plus startups now command, the news agency said.
San Francisco-based Dropbox set a price range of US$16 to US$18 per share, which would raise up to US$648 million in the highly anticipated public offering planned for Friday. The range serves as guidance, and the company will set a final price, based on investor feedback, on the eve of the IPO.
The pricing is about a 30 percent drop from the US$10 billion valuation Dropbox earned in early 2014 after a financing round led by BlackRock Inc.
The company, which started as a free service to share and store photos, music and other large files, has raised more than US$600 million from private investors.
New investors ranging from mutual funds to hedge funds began piling into startups a few years ago in hopes of earning better returns than the public markets offered, driving a spike in investments beginning in 2014 that came with outsized valuations.
Dropbox’s valuation cut suggests other companies that similarly raised a lot of money at high valuations but remain unprofitable, such as Uber Technologies Inc., may face a valuation decrease when they, too, go public.
Eric Schiffer, chairman and chief executive of the Patriarch Organization, a private equity firm, said Wall Street had rational figures for “grossly overvalued unicorns”, using the term for startup companies valued at US$1 billion or more.
“The IPO is a slap in the face to investors of the 2014 round” of Dropbox, he added.
Dropbox, co-founded in 2007 by Andrew Houston and Arash Ferdowsi, has 500 million users across 180 countries. But only about 11 million are paying customers, while the rest use the free service.
– Contact us at [email protected]