By Sweta Singh
(Reuters) - Cloud storage firm Dropbox Inc (DBX.O) raised the price range for its initial public offering by $2 on Wednesday as investors bid strongly for the first big tech IPO this year ahead of final pricing expected on Thursday.
The company now expects the offering to be priced between $18 and $20 per share, up from its previous range of $16 to $18.
The new price range suggests the company, co-founded by Andrew Houston and Arash Ferdowsi in 2007, could have a market capitalization of up to $8.7 billion based on a fully diluted share count and the IPO could raise up to $720 million.
"The initial file price range was quite conservative relative to the valuations placed on comparable firms, such as Box," said Jay Ritter, an IPO expert and professor at the University of Florida.
Despite the bump in price, Dropbox's market cap is still below the $10 billion valuation that it commanded in a 2014 private funding round.
Dropbox's IPO is being closely watched by the investment world to gauge market appetite for tech unicorns - young companies valued at more than $1 billion.
The last big unicorn to go public was Snapchat-owner Snap Inc (N:SNAP), whose shares have cratered since the company's high-profile IPO last year. The stock closed a dollar below its IPO price of $17 on Tuesday.
Dropbox's IPO comes on the heels of a strong market debut of cyber security firm Zscaler Inc (O:ZS), which had also raised the size and price of its offering.
Music streaming service Spotify, valued at roughly $19 billion in the private markets, has also filed for a direct listing and will debut on the NYSE on April 3.
Dropbox's increase in IPO price range bodes well for Spotify, said Michael Carvin, Chief Executive of personal finance technology firm SmartAsset. "They will be watching this closely as they look towards their own debut."
A direct listing lets investors and employees sell shares without the company raising new capital or hiring a Wall Street bank or broker to underwrite the offering.
In contrast, San Francisco-based Dropbox has hired JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS), among others, for its IPO.
The order book for the offering closes at midday on Wednesday and the pricing is expected on Thursday.
Sources told Reuters on Monday that the offering was oversubscribed.
The company has 500 million users and competes with Alphabet Inc's (O:GOOGL) Google, Microsoft Corp (O:MSFT), Amazon.com Inc (O:AMZN). Box Inc (N:BOX) is its main rival.
The stock will start trading on the Nasdaq on Friday.