Dropbox has filed for IPO confidentially, sources say

Dropbox Inc., the file-sharing private company valued at $10 billion, has filed confidentially for a U.S. initial public offering, people familiar with the matter said.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. 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 multibillion-dollar valuations, would follow Snap Inc.’s disappointing step into the public markets. How the stock fares post-listing will be an ongoing focus for Wall Street and the tech community. Snap shares are down 15% from its IPO in March.

Unlike money-losing Snap, Dropbox will come to the table with annualized sales of more than $1 billion, Chief Executive Drew Houston said in an interview last year. And it has 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.

ADT and Spotify

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 $14 billion in 2015 — the biggest such IPO in the last 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’s security company ADT Inc. is aiming to raise as much as $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 this month.

Nonpublic 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 $10-billion private valuation in its last private funding round in 2014. Although 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, the people said.

Its own cloud

As of August, Dropbox had 500 million users, including 200,000 businesses, storing and sharing files online through its cloud service. The service enables companies to keep documents in a commonly accessible place without having to build their own server farms. Dropbox 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 has spent hundreds of millions of dollars to build data centers 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 has made it easier for Dropbox to cut costs while speeding file transfers, Chief Operating Officer Dennis Woodside said in an interview last year.

The two lead banks have a history of working with Dropbox. Goldman Sachs advised the company on earlier funding rounds and extended the company credit, and JPMorgan led a $600-million credit line to Dropbox last year, the people said.

Taking on the risk of lending to a private company typically can help a firm’s chances in underwriting an eventual IPO. JPMorgan led a credit line extended to Dropbox, along with Goldman Sachs, Bank of America Corp., Deutsche Bank, Macquarie Group Ltd. and Royal Bank of Canada, people familiar with the matter said last March.

Goldman Sachs had been helping the company prepare IPO documents.

Barinka writes for Bloomberg.