Dropbox, the Cloud storage and collaboration company went public on the Nasdaq on Friday March 23rd, and its shares were up nearly 36% as of market close the same afternoon: the successful performance makes Dropbox the biggest tech IPO since Snapchat's in March 2017.
Dropbox started 10 years ago as a small start-up in the San Francisco-based Y Combinator incubator program, and over the years it has been able of warding off aggressive competition from the tech industry’s biggest players. Dropbox’s business comprises 11 million paying subscribers, 30% of which are business accounts with subscriptions plans linked with collaboration tools and integrations with products like Salesforce and Microsoft Office.
Dropbox ended the day of trading - under the symbol “DBX” - with a market valuation of around $10 billion. The company’s stock closed up 36% to $28.48, well above its already elevated $21 IPO price (which was in turn already above its initial projected $18 to $20 range), defying the gravity of the technology sector trends that – in the week of the IPO - slid 7.9%, according to S&P. Overall, the surge in the share price is a welcomed vote of market confidence for the company.
With Dropbox, investors get a chance to get exposure to a next-generation tech company, which is a proven business model. Moreover, the surge in Dropbox looks promising for Spotify, valued at roughly $19 billion in the private market: the music streaming service has filed for a direct listing and will start trading on the New York Stock Exchange tomorrow on April 3rd.
The next big push at Dropbox, explains Drew Houston – CEO of Dropbox –, is designing a more “enlightened way of working.” What does that mean exactly? “Instead of having my stuff in ten different places, I have it in one place,” says Houston, adding that it won’t be long before people will be saying, “Thank God for Dropbox because it makes my life easier at work.”
Overall, this looks like a solid IPO, especially when contrasted with recent over-subscribed IPOs like that of Snap Inc. Dropbox has a real, cash-generating business and demonstrates good decision-making skills.
However, there are some aspects that need to be considered carefully. For example, in order to ensure growth, Dropbox might consider starting marketing campaigns also for business users, since digital marketing used to experiment it extensively might not be enough in the near future. Moreover, Dropxbox should ensure consistency through its product pipeline, instead of offering products with a different value proposition such as its cloud-based productivity software Paper.
Now, more than one week has passed, and the file hosting service has been performing well.
Figure 1, DBX share from IPO’s date (23/03), Financial Times
Well done Dropbox, but what will be next?
- Flaminia Saffoncini
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