Article updated on 15/01/2018
2017 has marked the return of the Tech IPO, with Snapchat and MuleSoft having already kicked off proceedings and the possibility of Spotify and AppNexus following suit. Another potential IPO in the pipeline is Dropbox, the ubiquitous storage software which is used by hundreds of millions worldwide.
As with any tech unicorn, the rumour has been around for a while, but suddenly gathered pace in March of this year when the company secured a $600 million credit facility from six banks, among which JPMorgan & Chase, Deutsche Bank and Goldman Sachs are counted. This credit facility provides Dropbox with more flexibility as it looks to its future and the potential IPO on the cards.
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Following in the footsteps of AppNexus, the company has focused on cashflow and profitability through cutting costs prior to any IPO - it dropped an unprofitable partnership with Amazon Inc and focused instead on targeting sales of its subscription-based Dropbox Business product to larger companies. Whilst the vast majority of business users are small and medium sized companies, this move has still has allayed many fears that the company’s valuation was far too high and that it would be difficult to monetise a product which the vast majority of users do not pay for.
Part of the reason why the company might be so cautious about going public is that one competitor, Box Inc, had a tough experience in 2016, when share price dropped from a first day high of $23 in 2015 to under $10 just a year later. While it has now shown signs of recovery and risen again to $19, there are clear lessons to be learnt from a direct competitor.
There is also the small matter of challenging with other big hitters from the tech world for workplace storage and collaboration. Google has the G Suite, the aforementioned Box Inc is well-established and of course, Microsoft. There is however the feeling that the market for workplace collaboration tools is so big that there is room for multiple competitors. Dropbox also focuses a lot of attention on improving service, optimisation of products and innovation of new ones.
There has been no specific timeframe for issuing shares, nor has the company filed an S-1 form, so this remains very much in the rumour stage for the time being. However some have suggested that the banks involved in the credit line may wish to underwrite any potential IPO, this being a key factor in their offering it to Dropbox in the first place.
In January 2018, the FT confirmed that the company had filed plans to list with the Securities and Exchanges commission and hopes to go public before the end of March 2018.