Dropbox is filing for a $500 million IPO—but also saying it may never be profitable

Soon to be public.
Soon to be public.
Image: Beck Diefenbach / Reuters
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Now we know the first big tech company to go public in 2018. On Feb. 23, Dropbox announced its plans to raise $500 million through an IPO on Nasdaq (pdf) under the ticker “DBX.” The plans filed confidentially in January were unsealed by the Securities and Exchange Commission this week.

Dropbox is popular among individuals users who like the simplicity of the company’s cloud storage products, but it has struggled to make inroads in the enterprise space. The company hopes its IPO will give it the cash it needs to beat out rivals that also offer cloud documents, storage, and collaboration (like Box, Microsoft, and Google), as well as retain the individual users that have fueled most of Dropbox’s growth.

According to its IPO prospectus, Dropbox currently has 11 million paying subscribers (and 500 million registered users on the service).These subscriptions currently account for 90% of the company’s $1.1 billion in revenue. Dropbox has demonstrated impressive growth since 2015, roughly doubling the number of paying users and revenue. Dropbox became cash-flow positive in 2016, but recorded a loss of $111 million that year after pouring money back into its product development efforts.

The company’s prospectus warns it has “a history of net losses”; anticipates increasing expenses and slowing revenue growth; and notes that it “may not be able to achieve or maintain profitability.” To compete, Dropbox is pouring money into research and development to convert non-paying users to paid subscribers, and to enhance collaborative tools.

Private investors have valued Dropbox, founded in 2007, at as much as $10 billion.