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Dropbox's $7 billion IPO is a third from peak valuation


By Diptendu Lahiri

(Reuters) - Inc on Monday filed to go public, valuing the company at up to $7.1 billion, nearly a third below a valuation three years ago, as concerns rose that it was not growing fast enough to justify a loftier price tag.

The San Francisco-based company, which started as a free service to share and store photos, music and other large files, competes with much larger firms such as Alphabet Inc's Google, and as well as its main rival Box Inc.

A series of fundraisings included one in early 2015 valued at $10 billion. But later that year, the company's investment bankers warned that it couldn't match that valuation in an IPO and investor slashed the estimated worth of by almost 20 percent.

"Dropbox is still loss making and it's revenue is not enough to justify a market value of $10 billion. The price had to come down to lure in the investors," said Phil Davis, of, an investment advisory service.

The company, co-founded in 2007 by two graduates, and Arash Ferdowsi, reported 2017 revenue of $1.11 billion, up 31 percent from a year earlier, while its net loss narrowed to $111.7 million from $210.2 million in 2016.

In comparison revenue at Box, which started operation two years before Dropbox, is expected to increase 25 percent to about $506 million this fiscal from $398.6 million a year earlier. Box, which is also loss making, went public in 2015.

Dropbox plans to raise as much as $648 million by selling 36 million shares at between $16 and $18 per share in its initial public offering, the company said in a regulatory filing. (

The high end of the range values Dropbox at up to $7.07 billion, nearly three times that of Box's $2.85 billion market capitalisation.

The of has agreed to buy $100 million of Dropbox's Class A common stock in a private placement at the IPO price.

However, the owners of Class A shares will just have 2 percent of the voting power and the rest will stay with Class B shareholders. Most of Class B shares are owned by Houston, Ferdowsi and investors Sequoia Capital, Accel, and

Leaders of high-growth companies often resist coming to public markets and offering full voting rights out of fear they will lose control of their companies.

Last year surprised investors by its unusual decision to offer new investors a class of common stock with no voting rights.

Dropbox, which crossed 1 million users mark in 2010, now has 500 million users across 180 countries. About 11 million of those users are paying customers.

(Additional reporting by in Bengaluru; Editing by and Savio D'Souza)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, March 12 2018. 22:36 IST