Dropbox IPO price range puts valuation up to $7.1bn

NEW YORK: Dropbox Inc on Monday offered a price range for shares in its initial public offering that would value it at up to $7.1 billion, nearly a third below the valuation it commanded in 2014, a clear sign of how overheated the private tech market became a few years back.
Cloud storage company 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 spring calendar for technology offerings is relatively busy, including cyber security company Zscaler’s planned debut later this week and music company Spotify’s expected listing early next month.
San Francisco-based Dropbox set a price range of $16 to $18 per share, which would raise up to $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 per cent drop from the $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 $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.
Now, 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.
“Dropbox is still loss-making and its revenue is not enough to justify a market value of $10 billion,” said Phil Davis, chief executive of Phil’s Stock World, an investment advisory service.“The price had to come down to lure in the investors.” — Reuters