SAN FRANCISCO — What, no valuation worth tens of billions of dollars on the day of your initial public offering, Box CEO Aaron Levie?
No market-denting, mega-stock debuts a la Facebook and Alibaba?
Instead, the operator of an Internet-based storage service executed what once would have been a normal, healthy initial technology stock offering. In terms of its size and price, the deal values Box (TICKER: BOX) on par with rivals such as Workday (TICKER: WDAY), even with a first-day “pop” of as much as 77%. (It closed at $ 23.23, up 66%.)
Friday’s deal suggests a certain sobriety among tech investors in a market that lately has looked more like a bubble. Box has big rivals — Google, Amazon.com and Microsoft, among others — and a sea of red ink. Its financials illustrate why investors were so cautious about Box, which is led by Levie, 29.
Box posted an operating loss of $ 44.8 million for the quarter ended in October.
It was Box’s eighth straight quarter of steep losses, according to its most recent securities filing. The 10-year-old company has lost a cumulative $ 483 million since its founding by college dropout Levie and his friend Dylan Smith.
Enough to scare away investors from plunking money on tech IPO candidates?
Not exactly. On the bullish side, Box’s gross profit margins have hovered under 80% — a fat margin that calls to mind those of Microsoft, Oracle and other software giants.
If Levie can cut spending while maintaining a high revenue-growth rate, Box has the chance to build a story tech investors may warm to.
The encouraging debut by Box in the tech industry’s first big IPO of the new year indicates it might grow beyond the commodity business of online storage and into a lucrative suite of tools for the health care and retail industries, tech executives say.
On Friday, one of the most highly anticipated IPOs of the year hits the market as cloud storage company Box hopes to raise at least $ 138 million through a 12.5 million share public offering. The company should trade higher in the near-term, but long Newslook
“It validates that our market space is on fire and ready to grow,” says Yorgen Edholm, CEO of Accellion, a Box rival. “The waters are looking much warmer now, and it’s only a matter of time before the next competitor — ahem, Dropbox — jumps in.”
Dropbox, another online storage provider valued at about $ 10 billion by investors, is worth about four times Box ($ 2.8 billion).
The overlooked enterprise market is where serious coin is made in tech. Don’t let the digital bells and whistles of flashy social media start-ups, most of whom scratch out a profit, deceive you.
Investors have shown a willingness to back other tech companies with a history of losses. Twitter has a market value of $ 24 billion even though the company hasn’t turned a profit. Its stock is up roughly 50% since its first day of trading in November 2013.
“Despite the criticism, Box’s successful IPO is a significant step and move for the entire enterprise software industry,” says Christian Gheorghe, CEO of Tidemark.
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