Years of swirling rumors and eager expectations were put to rest on Friday after Dropbox filed for an IPO, and the tech market is already working itself into a frenzy analyzing the company’s future market prospects. Investors have been keeping a close eye on DropBox (NASDAQ:DBX) for some time now, and information made public for the first time by the company’s filings with the SEC have revealed crucial aspects of its business strategy that have remained mysterious until now. The potential unicorn is hoping to bring in more than $600 million with its ambitious IPO, but Dropbox still has work to do to convince investors it remains viable in the long term.
Unpacking Dropbox’s IPO
With Dropbox having been a private company for over 10 years, investors have frequently felt frustrated at how out of the loop they are when it comes to the company’s internal finances. Filings made with the SEC on Friday, however, are offering the first real glimpse into Dropbox’s inner workings, and some investors have found themselves quite surprised by what they’ve found.
Dropbox’s filing, for instance, shows that the company has reaped in more than $1 billion in annual revenue, and reveals some of its future plans for expansion. The cloud service and storage company has been battling critics who have asserted it can’t remain profitable for some time now, so it’s impressive annual revenue figures are likely to silence some who believe Dropbox doesn’t have what it takes to continuously lure in paying users in order to expand its cloud services.
The company is hoping for an IPO that prices its shares somewhere in the $16 to $18 per share range, according to its filings, and will be selling up to 36 million shares when it finally hits the market. If Dropbox’s executives are successful in wooing over investors, the market debut could reap the company nearly $648 million, which could prove crucial towards future expansion efforts as competition in the cloud storage industry heats up.
Filings revealed that not all shares made available will be getting scooped up by hungry public investors looking to get in on Dropbox’s business, however; the company will also be selling some stock exclusively to Salesforce, one of its newer business partners, in a move that could secure the company an additional $100 million. Dropbox’s announcement that it would be integrating Salesforce (NYSE:CRM) more into its services came rather unexpectedly, but boosted the confidence of many investors who thought the company needed to expand its partnerships in order to remain viable in the future.
Some investors Aren’t Yet Sold
Despite the buzz surrounding Dropbox’s forthcoming market debut, however, some investors aren’t yet sold on the company, and believe that its best days may be behind it. Dropbox’s IPO prices the company somewhere around the $7 to $8 billion mark, which may seem quite impressive at first, but is actually quite lower than what it used to be. Dropbox was once privately valued as highly as $10 billion, for instance, so proponents of the cloud service company beating their chest over its potential unicorn status should remember that it’s fallen from high heights before, and could suffer such a tragedy again if it’s not careful.
Despite a dip in its valuation, however, even its harshest critics have yet to assert that Dropbox is on its way out the door. With more than 500 million registered users, Dropbox remains quite popular among consumers, and is at the forefront of a rapidly burgeoning cloud industry that’s only likely to expand in the future. As more digitally savvy and tech-driven consumers around the globe purchase gadgets and start posting things online, they’ll need services like Dropbox to manage their data, meaning the company can rely on steady demand for its services for some time.
With a thriving industry comes competition, however, and some of Dropbox’s critics still assert that the company needs to invest more in its cloud services, just like the renewable energy sector, if it’s to remain an attractive option to consumers faced with a myriad of choices as the cloud market expands and new players enter the field. With revenue climbing by an astonishing 31 percent from 2016 to 2017, however, and now with its forthcoming IPO rapidly barreling toward the market, it stands the reason the company won’t be in want of cash for future improvements.
Investors should keep a close eye on Dropbox, regardless of the company’s dip in valuation since 2014. The company’s shifting focus that’s placing more attention on its business-orientated services will likely continue to draw in heavy revenue figures in the future, and losses have been shrinking lately. While companies like Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), and Microsoft (NASDAQ:MSFT) may be breathing down Dropbox’s neck, the cloud behemoth has shown it has a few tricks of its own up its sleeve, and will likely thrive against the competition as it enters the public market.