Published: Tue, March 13, 2018
Markets | By Rosalie Gross

Dropbox looks to raise $648 million in upcoming IPO

Dropbox looks to raise $648 million in upcoming IPO

The reverse split allows the company to set a higher IPO price without diluting insiders' valuation.

As many tech companies continue to do after going public, Dropbox is still losing money, although the $112 million that it lost a year ago was an improvement from the $210 million it last in 2016. But later that year, the company's investment bankers warned that it couldn't match that valuation in an IPO and investor Fidelity Investments slashed the estimated worth of Dropbox by nearly 20 percent. The company will face major competitors such as Alphabet's (NASDAQ: GOOGL) Google and Apple Inc.

Dropbox had revenue of $603.8 million in 2016, and that grew to $844.8 million in 2016 and $1.1068 billion in 2017.

Dropbox along with music streaming service company Spotify are the year's two most anticipated tech IPOs. Last year, it had positive free cash flow of $305 million, more than double the previous year. Box, which is also loss making, went public in 2015.

According to a Bloomberg calculation, the transaction would value Dropbox at $7.1 billion, less than its $10 billion value during a prior private capital raising effort in 2014.

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"We invest in early-to-late stage enterprise cloud companies for strategic reasons and to support key business initiatives to grow our ecosystem of partners and accelerate the adoption of cloud technologies", Salesforce said in the filing.

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 $1 billion or more.

Dropbox has gotten a vote of confidence from one major investor, announcing Monday that Salesforce will purchase $100 million of its shares in a private placement that will occur immediately after the IPO closes.

Dropbox, which has 11 million paying users across 180 countries, said that about half of its 2017 revenue came from customers outside the United States.

Dropbox will probably not initially be loved on public markets as much as it was by venture capitalists. Sequoia Capital is the largest shareholder among outside investors, with about a 25 percent stake.

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