THE PRICE IS RIGHT

Dropbox thinks it’s worth as much as $8 billion in IPO

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Obsession
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File sharing and storage company Dropbox priced its shares in its initial public offering this morning, valuing the entire company at between $7 billion and $8 billion, according to documents filed with the US Securities and Exchange Commission.

In an amendment to its Feb. 23 S-1 filing, Dropbox said it will price shares at between $16 and $18 each and intends to raise up to $648 million. The company will sell $100 million worth of shares to Salesforce.com’s venture arm at the same time of its IPO. The IPO value is less than its 2014 funding round, when it was valued at $10 billion.

According to data compiled by Bloomberg, Dropbox would be the third-biggest IPO from an enterprise technology company in the last three years and the largest tech offering since Snap’s IPO last year. The company offers its services for free to registered users, then asks them to pay if they want additional storage. It doesn’t make any money; it lost $111.7 million on $1.11 billion in revenue last year, and revenue growth has been declining.

Among risk factors listed in Dropbox’s offering documents are its ability to get non-paying users to upgrade and become paying subscribers. “If our paying users fail to renew or cancel their subscriptions, or if we fail to upgrade our paying users to premium offerings or expand within organizations, our business, results of operations, and financial condition may be harmed,” the filing said.

The company had 11 million paying users and over 500 million registered users on Dec. 31, 2017—just over 2% of its registered users pay Dropbox for the service. The actual number of unique users is even lower, as people may register for the service more than once. “A majority of our registered users may never convert to a paid subscription to our platform,” Dropbox said in the filing.

Dropbox, based in San Francisco, was founded in 2007 by a couple computer science students from MIT, Drew Houston and Arash Ferdowsi. They each plan to sell 2.3 million of their own shares, generating about $39 million.

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