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Dropbox IPO: In-Demand And Oversubscribed

Published 03/20/2018, 08:39 AM
Updated 03/09/2019, 08:30 AM
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The initial public offering of web-based cloud storage company DropBox Inc (NASDAQ:DBX) has been reported to be in demand following an oversubscribed IPO launch according to sources familiar with the matter. Reports revealed on Monday that there is currently a high demand for one of the biggest tech IPOs since Snap Inc (NYSE:SNAP) more than a year ago. This is despite the outlook on Dropbox’s initial public offering of their shares being on a slightly negative note.

Dropbox Inc announced its IPO in a filing with the U.S. Securities and Exchange Commission last week. The company also announced that it will offer 36 million of its Class A shares to be priced between $16 to $18 per share totaling the value of the company by as much as $7.1 billion following the IPO launch.

During the initial public offering of the company, Dropbox had expectations to raise as much as $648 million with the IPO price to be decided prior to the official offering based on public or investor sentiments.

While analysts have warned against the possibility of the shares being unprofitable during the first couple of months or years due to the losses incurred by the company as a result of its massive revenue growth. The IPO of the company also faced doubts from investors due to the ratio of its paying users compared to its total worldwide users where only 11 million recorded to have availed of the upgraded service out of the 500 million people all over the world using the service.

The value of the company has been estimated to have hit $10 billion during its years as a public company. Dropbox valuation after going public is expected to hit as high as $7.5 billion.

Other anonymous reports also stated that it is currently too early to predict the pricing of the IPO. However, reports also stated that due to the interest of the market in the IPO, the outlook is currently bright. The sources also added that the process of the IPO is still underway.

Investors were also wary of the IPO due to the expectations of the market that the U.S. Federal Reserve to push interest rates on Wednesday. Dropbox’s deal is set to close a day before the expected Fed announcement.

During the beginning of the week, tech shares were mostly down following Facebook (NASDAQ:FB) Inc’s recent problems in regards to its data privacy. This pushed the tech-Nasdaq down by more than 2%.

While there are currently plans to offer 36 million Class A shares, another 5.4 million shares could be offered should underwriters exercise their rights to buy more stock.

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