Box shares soar in market debut

Box co-founders Aaron Levie (from left) and Dylan Smith ring a ceremonial bell as they celebrate their IPO with Jeffrey Sprecher, the chairman of the New York Stock Exchange.

SAN FRANCISCO — Shares of online storage provider Box soared 66 percent in their stock market debut Friday despite the company’s decade-long history of losses, a showing that might encourage more unprofitable technology startups to go public this year.

 

The start on the New York Stock Exchange came after Box Inc. sold 12.5 million shares for $14 apiece in a delayed IPO that raised $175 million. That represented about a 10 percent stake in the company.

Box’s stock gained $9.23 to close at $23.23, giving the company a market value of $2.7 billion.

Although Box focuses on selling online storage services to companies and government agencies, it also offers free, bare-bones accounts to consumers. All told, 32 million people have Box accounts.

The wide usage of Box’s service probably helped drum up more interest in the company’s initial public offering, said Sam Hamadeh, who runs PrivCo, a firm that tracks startups.

“I think this is going to be a short-term pop” in Box’s stock price, Hamadeh said. “What you are seeing is a lot of buying by doctors, lawyers and dentists who just know Box’s name and didn’t pay any attention to the financials. And the financials are horrendous.”

Since college dropout Aaron Levie founded Box with friend Dylan Smith in 2005, Box has accumulated $483 million in uninterrupted losses, according to its IPO filing. The Los Altos, Calif., company warned investors that it won’t be making money anytime soon.

Concerns about Box’s shaky finances contributed to the company’s decision to postpone its IPO last July.

Investors now seem more intrigued with Box’s pioneering role in online storage – part of a phenomenon known as cloud computing. The demand to store documents, photos and other digital content in remote data centers so the material can be accessed on an Internet-connected device has been
steadily rising as more people rely on smartphones and tablets for their computing needs.

“The leaders in this new environment are being created right now, and there are a lot of investors that recognize that,” Levie, 30, said in a Friday interview.

Box is facing intense competition from much-larger companies, including Google Inc., Microsoft Corp., and Amazon.com Inc., as well as a better-known online storage service, Dropbox.

Dropbox is considered to be among the leading candidates to go public this year, especially after investors embraced Box’s IPO.

“This validates that our market space is on fire and ready to grow,” said Yorgen Edholm, the CEO of Accellion, another online storage service.

Dropbox declined to comment about its IPO plans. The San Francisco company was valued at $10 billion in its last round of fundraising last year.

Levie, who remains Box’s CEO, was among the biggest winners Friday. He owns nearly 4.1 million shares, now worth $95 million.

 

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Mon, 10/23/2017 - 18:35

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