The initial public offering of Dropbox Inc. may help end the lack of Silicon Valley companies from going public thanks to their own high private valuations.
After a target value in its private funding of 2014 was $7.5 billion, strong demand for shares of Dropbox helped close that gap as its IPO was priced above the range that was marketed. Dropbox on Thursday sold 36 million shares prices at $21 apiece.
Including the restricted stock units, the value of the company now increases to over $9.1 billion. Shares sold higher than the marketed range that was between $18 and $20 per share, raising over $756 million. Initially Dropbox offered it stock for between $16 and $18 prior to increasing its range earlier this week.
Investors were willing to pay even though equity markets, in particular tech stocks, tumbled sending the Nasdaq 100 on its biggest drop for six weeks.
Dropbox might prove the down round at IPO, where the debut market value of a company does not match up to its promise during fundraising, does not work against it becoming a success as a public company.
The U.S. pipeline of IPOs has slowed as billions in private funding have driven valuations up of technology companies and created concerns over not being able to live up to the metrics.
Candidates for IPOs have put listings off in an attempt to grow into the private valuations they have been given.
The success of Square Inc., which faced hefty criticism for its 2015 listing at a value much below its last round of funding, post IPO has helped to remove that stigma of down round. The payments company was able to raise less than had been expected to reach a $2.9 billion market value that was far below the valuation of $6 billion it was given during private funding only one year earlier.
Since then Square has proven itself to its investors. Revenue has doubled since the year prior to being listing, while losses shrank by over a half and its business stopped burning cash. The stock in turn increased by over six fold since its IPO giving it a new market value in excess of $22 billion.
Dropbox, whose users share and store files online via its cloud service, may have received more slack because its financial profile was more favorable when private. The company has a positive cash flow and is edging close to producing a profit, while revenue growth is over 30% higher than last year.