Dropbox shares soar in biggest tech IPO debut since Snap

Dropbox shares soar in biggest tech IPO debut since Snap

The excitement around Dropbox's IPO signals a market appetite for more big tech companies to go public. That appeared to drag down the industry altogether, with Google and Apple having fallen about 7 percent this month.

However, on Friday morning the stock opened at $29, well above Thursday's set price and the initial price per share estimate of $16-$18.

That's a surprising sign of strength for Dropbox - many observers expected the file-sharing company to not reach the last valuation. In 2018, though, all eyes have been on Dropbox and its own plans to go public.

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Houston, 35, already a billionaire ahead of the initial public offering, saw his fortune swell US$760 million to $2.6 billion as Dropbox shares advanced 43 per cent to US$30 at 12:58 p.m.in NY, and earlier climbed as high as US$31.60.

"In the case of Dropbox, investors get a chance to get exposure to a next-generation tech company, which is a proven business model", said Tom Taulli, InvestorPlace.com analyst. It is the largest tech stock IPO in more than a year and early pricing bodes well for other IPOs from tech unicorns and startups. "It has an attractive story to justify its need for financing and the market dynamics are good, ' Josh Lerner, professor of Investment Banking at Harvard Business School, told Reuters, adding 'But at the same time the environment is also competitive". Although the paying user base is small, Dropbox forecasts that out of the 500 million, 300 million users are more likely to become paying users in the future due to their characteristics such as email domains, devices and geographic attributes. The challenge for the company moving forward will be how it can convert its large base of unpaid users in hopes of erasing its $112-million loss on revenue of $1.11 billion a year ago.

Dropbox co-founders Drew Houston (left, center) and Aresh Ferdowski ring the opening bell at the Nasdaq on the day of their IPO. However, as a public company Dropbox will be under pressure to quickly trim its losses. Its net loss, however, was almost halved, to $111.7 million.

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