The Dropbox IPO: Here’s what you should know before investing in DBX

The popular file sharing and storage company, Dropbox is going public, holding an IPO on the Nasdaq stock exchange on Friday, March 23rd, 2018 (NASDAQ: DBX). The company will be selling its stocks to investors, in the hope of raising up to $648 million. Despite a previous valuation of $10 billion during its last private funding round in 2014, the company will be going public with a projected market cap of $7-8 billion. Soon after the IPO, the Dropbox stock will be open for trading and investing on eToro at the first market price available. If you wish to include it in your portfolio as soon as it goes live on the platform, you can place an order today.

This is not investment advice. CFD trading. Your capital is at risk.

In more than a decade of operations, Dropbox has been a pioneer in online storage, remaining resilient despite stiff competition from industry giants, such as Google and Amazon. Dropbox’s business model is based on paid subscriptions, built on a foundation of small and medium business (SMBs) and private users. The company reports having some 500 million users, but has not shared how many of them are active, paying users.

Outside the box

In what is shaping up to be one of the hottest IPOs of the year, during the Dropbox IPO, it will be offering its stocks at prices ranging from $16 to 18 per share. Unlike Snapchat Inc. that went public last year and was then greatly devalued, Dropbox’s IPO may be considered more robust. While SNAP tumbled for lack of a clear business model, despite having millions of users, Dropbox has a solid cash flow and an impressive number of paying users (with the average user paying more than $100 per year).

In 2015, Box, a different cloud storage service company, went public. While initially showing great results, with its stock climbing from $14 to $23 per share, after one year, its value tumbled as low as $10. However, it later recovered, and is trading around $20 today. It might be tempting to make a straightforward comparison between Dropbox and Box, but there are differences. First of all, Box targets businesses exclusively, while Dropbox has a solid private user base. Second, when Box went public, it was valued at $1.7 billion, less than a quarter of Dropbox’s value.   

Despite reporting net losses, mainly due to depreciation and stock compensation expenses, Dropbox has an impressive revenue stream. The company’s reported revenue grew by 40% in 2016, and by 31% in 2017, reaching $1.11 billion last year. Moreover, the company’s cash flow became positive for the first time in 2016, and grew further in 2017, indicating that if it continues to manage itself well on the business front, it could prove to be an extremely profitable business.

Reaching for the clouds

In 2007, when “cloud computing” was still not that common a term, two MIT students, Drew Houston and Arash Ferdowsi, decided to start a company which would utilize cloud computing for fast and easy file storage and sharing. Houston says that he thought of the idea after repeatedly forgetting to bring his USB flash drive to school. While online storage  solutions existed before, the company’s emphasis on ease-of-use and the fact that it offered free basic storage packages, helped its user-base grow exponentially, and the founders to attract investors.

In its many years of operations, Dropbox has expanded to offer email services (via the acquisition of Mailbox) and a photo sharing app called Carousel. While both individual apps were shut down in 2015, key elements of them were introduced on the Dropbox platform. Dropbox became one of the most highly valued startup companies in the world in 2014, when it was estimated to be worth $10 billion.

Dropbox on eToro

Soon after the Dropbox IPO, DBX shares will be available for trading and investing on eToro. The price will be set at the time the stocks are made available to the public, so it will most likely differ from the initial offering price. The DBX stock is another fine addition to eToro’s ever-growing selection of financial instruments. eToro will notify its clients when the stock is made available, so stay tuned for updates.

In the meantime, you can place an order to buy DBX stocks on the eToro platform as soon as it’s available. Note: There’s a limited amount available and the execution price will NOT be the IPO Price.

This is not investment advice. CFD trading. Your capital is at risk.