AGAINST THE TIDE

Here’s how Box can still go public in the midst of the brutal tech selloff

April 15, 2014
April 15, 2014

It’s rough out there.

With the tech markets falling out of bed over the past few weeks, a number of companies close to launching their initial public offerings have opted to hold off on pulling the trigger. It makes sense. Prospective investors look increasingly leery (paywall) of plunging their money into the next hot IPO.

What about Box Inc.? Rumors about possible delays around the cloud storage firm’s offering have been floating around Wall Street and Silicon Valley. Box is slated to start talking to prospective investors–in a process known as a roadshow–sometime this week. Sources say that although the tech euphoria has abated considerably, firms like Box believe their prospects are strong enough to defy the market headwinds. One banker following tech IPOs like Box told Quartz that companies with a strong business and recognizable brand shouldn’t have a problem listing its shares now. A Box spokeswoman declined to comment on the firm’s plans.

If Box does decide to brave the choppy markets, the details of the deal will be important. In other words, the bankers running the offering—Morgan Stanley is leading the deal—may have to dig deep in the old bag of tricks. For instance the bankers could tighten the price range on the deal. Offering shares within a more conservative price range may give it a better chance to pop in its first day of trading. And the first-day pop may give the shares enough momentum to weather any rough patches in the markets. Another route the bankers and company could take includes offering a smaller number of shares to the public. A smaller “float” might be more digestible by investors and help the offering perform better.

Yes, Box has buzz. It doesn’t, however, have profits. Long story short, in these markets, Aaron Levie’s bankers have their work cut out for them.

 

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