Cloud storage firm Dropbox has disclosed that its valuation target has been set at between $7 billion to $8 billion and that its shares will range between $16 and $18. This valuation is below the $10 billion price that had been placed on Dropbox four years ago while raising private capital in a BlackRock-led round, an indication of the overheated private tech market that existed then.
In its public offering the San Francisco, California-based Dropbox expects to raise $648 million. The range Dropbox has set for its shares will however only serve guidance purposes as the final price will be set by Dropbox on the IPO’s eve and this will be dependent on feedback from investors.
So far Dropbox has raised over $0.6 billion from private investors. The cut in Dropbox’s valuation could mean that other tech firms which attracted huge investor interest and which are still unprofitable, the likes of Uber Technologies for instance, are also likely to have their valuations revised downwards.
“Dropbox is still loss-making and its revenue is not enough to justify a market value of $10 billion. The price had to come down to lure in the investors,” Phil Davis, an investment consultant, said.
Some of Dropbox’s competitors include Box, Microsoft, Amazon and Google. The web storage firm has struggled in its monetization efforts since many of its bigger rivals provide similar services for free. Dropbox has consequently had to increase the array of services it offers businesses to include group collaboration and file synch tools.
Rise in revenues
As a result revenues in 2017 increased by 31% from the previous year to reach a figure of $1.1 billion. Losses also went down by close to 50% to reach a figure of $112 million. Dropbox’s positive cash flow also more than doubled last year from the previous year to reach a figure of $305 million.
Started a little over a decade ago by Arash Ferdowsi and Andrew Houston, Dropbox now boasts of half a billion users spread over 180 countries and territories. Most of the users generate no revenue for the firm and only around 11 million have signed up to a paid subscription.
Dropbox has indicated that once the public offering is completed common stock worth $100 million will be sold to Salesforce’s venture capital arm in a private placement. Some of the largest shareholders of the web storage firm are Sequoia Capital and Houston. After the IPO Houston’s stake in Dropbox is expected to be 24% while that of Sequoia will be 25%.