Dropbox, Valued Privately at $10 Billion, Could Droop by 25% in I.P.O.


Dropbox appears set to join a relatively small group of “down round” initial public offerings, in which a firm’s value is lower than it was when the firm raised money privately. That group includes the meal kit delivery service Hello Fresh and the database software provider MongoDB, according to the research firm CB Insights.

Dropbox could still hit that $10 billion valuation over time, assuming its stock price rises after it goes public. A spokeswoman for Dropbox declined to comment.

Many investors are nonetheless expected to flock to Dropbox, in a year that is likely to be busy for stock market debuts. Dropbox and Spotify, the music-streaming giant, which is planning its own listing, could presage a series that eventually includes the likes of Uber and Airbnb.

The market for initial offerings this year is already proving robust, with 29 so far, up 61 percent from a year ago, according to the advisory firm Renaissance Capital.

Monday’s filing preceded Dropbox’s road show to pitch its offering to potential investors. As the company’s executives and their advisers begin to crisscross the country in a series of meetings, their goal is to convince would-be buyers that its stock will perform more like Facebook’s, which has risen enormously in recent years, and less like Snap’s, whose stock is down 34 percent since its debut last year.

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Dropbox is likely to begin trading on the Nasdaq stock market — under the ticker symbol DBX — by the end of next week.

Going public would be the biggest accomplishment yet for Dropbox since it was founded in 2007. Drew Houston and Arash Ferdowsi, two students at the Massachusetts Institute of Technology, created Dropbox as a workaround for not having USB flash drives handy, and the company has become one of the giants in the business of sharing files online.

Though analysts have long worried about the prospects of independent file-storage providers like Dropbox and Box, a competitor that went public three years ago, the companies have shown that they can survive.


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“When you’ve really honed your focus and how to differentiate yourself, you can do well,” Aaron Levie, Box’s chief executive, said in an interview.

Dropbox’s business has grown rapidly over the past three years, reaching $1.1 billion in sales last year. Though the company continues to lose money, it has reduced the red ink on its books, losing $111.7 million last year.

Though Dropbox may have fallen short of its last fund-raising valuation in the initial offering process thus far, some in Silicon Valley said the company’s future looked bright.

“The Dropbox business is way better than anyone expected,” Mr. Ganesan said. “My feeling is that no one should be focused on what the short-term valuation of the company is.”

Even Mr. Levie of Box — whose company also went public at a lower valuation than its last private fund-raising round, only to eventually trade above that level — said investors should not worry too much about at what level Dropbox goes public.

“I’ve learned not to put too much stock in the pre-I.P.O. pricing dynamic,” he said.

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