Box Inc’s shares soared 66 percent in their stock market debut on Friday despite the online storage provider’s decade-long history of losses, a showing that might encourage more unprofitable technology startups to go public this year.
The start on the New York Stock Exchange came after Box sold 12.5 million shares at US$14 each in a delayed initial public offering (IPO) that raised US$175 million. That represented about a 10 percent stake in the company.
Box’s stock gained US$9.23 to close at US$23.23, giving the company a market value of US$2.7 billion.
Although Box focuses on selling online storage services to companies and government agencies, the company also offers free, bare-bones accounts to consumers. Overall, 32 million people have Box accounts.
The wide usage of Box’s service probably helped drum up more interest in the company’s IPO, said Sam Hamadeh, who runs PrivCo, a firm that tracks startups.
“I think this is going to be a short-term pop” in Box’s stock price, Hamadeh said. “What you are seeing is a lot of buying by doctors, lawyers and dentists who just know Box’s name and didn’t pay any attention to the financials, and the financials are horrendous.”
Since college dropout Aaron Levie founded Box with his friend Dylan Smith in 2005, Box has accumulated US$483 million in uninterrupted losses, according to its IPO filing.
The Los Altos, California-based company also warned investors that it would not be making money anytime soon.
Investors now seem more intrigued with Box’s pioneering role in online storage — part of a phenomenon known as cloud computing. The demand to store documents, photos and other digital content in remote data centers so the material can be accessed on an Internet-connected device has been steadily rising as more people rely on smartphones and tablets for their computing needs.
“The leaders in this new environment are being created right now, and there are a lot of investors that recognize that,” Levie, 30, said in an interview on Friday.
Box is facing intense competition from much-larger companies, including Google Inc, Microsoft Corp and Amazon.com Inc, as well as a better-known online storage service provider Dropbox Inc.
Dropbox is considered to be among the leading candidates to go public this year, especially after investors embraced Box’s IPO.
“This validates that our market space is on fire and ready to grow,” said Yorgen Edholm, chief executive officer of Accellion, another online storage service. “The waters are looking much warmer now and it’s only a matter of time before the next competitor, ahem, Dropbox jumps in.”
Dropbox declined to comment on its IPO plans. The San Francisco company was valued at US$10 billion in its last round of fundraising last year.
Levie, who remains Box’s chief executive officer, was among the biggest winners on Friday. He owns nearly 4.1 million shares, now worth US$95 million.
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