IPO looms for San Francisco-based Dropbox

Growing list of tech firms to make leap

Dropbox Inc., the file-sharing private company valued at US$10 billion, has filed confidentially for a U.S. initial public offering, people familiar with the matter said. and will lead the potential listing, according to the people, who asked not to be identified because the filing wasn’t public. Dropbox is talking to other banks this month to fill additional roles on the IPO, the people said. The company is aiming to list in the first half of this year, one of the people said.

Representatives for Dropbox, Goldman Sachs and JPMorgan declined to comment.

A share sale by San Francisco-based Dropbox, one of a closely watched group of high-profile private tech companies with multibilliondollar valuations, would follow Snap Inc.’s disappointing step into the public markets. How the stock fares post-listing will be an ongoing focus for both Wall Street and the tech community. Snap shares are down 15 per cent from its IPO last March.

Unlike money-losing Snap, Dropbox will come to the table with annualized sales of more than US$1 billion, chief executive Drew Houston said in an interview last year. It’s also been profitable, excluding interest, taxes, depreciation and amortization. Those benchmarks are the product of more than two years of focusing the company, expanding its product suite for businesses and reining in expenses, Houston said at the time.

Dropbox could be one of the biggest U.S. enterprise technology companies to list domestically in recent years. First Data Corp. went public at a market value of about US$14 billion in 2015 — the biggest such IPO in five years.

Dropbox joins a growing list of large tech companies preparing to go public in the U.S. early this year. Apollo Global Management LLC’s security company ADT Inc. is aiming to raise as much as US$2.1 billion in an IPO expected to price on Jan. 18. Spotify, owner of the world’s largest paid music service, plans to execute its unconventional direct listing this quarter, a person familiar with the matter said month.

Non-public filings have become more common since July, when the U.S. Securities and Exchange Commission began allowing all companies to file early IPO documents confidentially — a perk previously reserved for smaller businesses.

Dropbox achieved its US$10 billion private valuation in its last private funding round in 2014. While it’s uncertain whether the company will be able to initially sell shares above that valuation, the stock could trade higher once it’s public, sources said.

As of August, Dropbox had 500 million users, including 200,000 businesses, storing and sharing files online through its cloud service. The service lets companies keep this documents in a commonly accessible place without having to build their own server farms. The company will have to show potential investors how it’s differentiating its core file-sharing products and newer collaboration tools from the likes of Google, Microsoft Corp. and Box Inc.

Dropbox is likely to tout its biggest investment in recent years: its own cloud. It’s spent hundreds of millions of dollars to build data centres and mostly wean itself off of Amazon.com Inc.’s servers, a rare feat for a software business with hundreds of millions of users. That’s made it easier for Dropbox to cut costs while speeding file transfers, Chief operating officer Dennis Woodside said in an interview last year.