Dropbox Inc exceeded its private valuation in its market debut, as shares soared after pricing above their marketed range in the biggest technology initial public offering (IPO) of the year.
Shares closed at US$28.48 apiece in New York on Friday, giving the file-sharing company a market valuation of US$11.2 billion. They climbed as much as 50 percent above their IPO price in earlier trading to as high as US$31.60.
Dropbox, founded by Drew Houston and Arash Ferdowsi in 2007, was valued at US$10 billion in its last private funding round four years ago.
Investors’ enthusiastic response to the IPO could help clear one roadblock that has been holding back Silicon Valley companies from going public: their own lofty private valuations.
After initially targeting a market value of only US$7.1 billion, strong demand for Dropbox shares helped close the gap as its IPO priced above the marketed range.
Dropbox sold 36 million shares for US$21 apiece on Thursday, raising US$756 million, after offering them for US$18 to US$20 apiece — already an increase from the original price range.
Dropbox appears to have overcome the so-called “down round” at its IPO, in which a company’s debut market valuation fails to match up to its fund-raising promise.
Friday’s share surge indicates investors do not see that gap as an obstacle to becoming a successful public company.
While there is more to judging a successful public company than market value, IPO performance is so closely watched that negative sentiment after a value cut can hit customer relationships and employee morale, and can potentially limit the ability to raise more money.
The San Francisco-based Dropbox is cash-flow positive and edging toward a net profit, while showing revenue growth of more than 30 percent last year to US$1.1 billion, according to its latest pre-IPO filing.
Investors’ comfort with Dropbox’s books could help it avoid a flame-out like Blue Apron Holdings Inc.
The money-losing meal-kit delivery company raised less than expected at a US$2 billion valuation, 38 percent lower than its last private round. Its stock has tumbled another 80 percent since its June IPO to value the company at just US$390 million.
Dropbox has also had more time to adjust to life in the spotlight. While Blue Apron was founded in 2012 and went public within five years, Dropbox cofounders Houston and Ferdowsi have had more than a decade to prepare for this moment.
The company made its public market debut at a time when technology stocks have slipped out of favor. Facebook Inc has dropped about 14 percent this past week as it acknowledged its mishandling of user data, while less-than-stellar earnings have driven others lower.
The Cboe Volatility Index is up 39 percent since Wednesday as US President Donald Trump announced about US$50 billion of tariffs against China over intellectual property violations.
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