Box, the cloud based software maker, may finally become a public company with trading expected to begin on Friday. After spending most of 2014 in pre-IPO limbo that was dogged by delays, Box now has a chance to redeem itself. “We think the deal will be received very well,” says Kathleen Smith, Principal of the Renaissance IPO ETF (IPO), which is composed of newly public companies.
Box aims to raise $150 million by selling 12.5 million shares to the public within the range of $11 to $13 a share. The deal would give the company a market value of around $1.4B which Smith believes is priced right. “It’s being valued, we think, at a reasonable price relative to other fast growing enterprise cloud based software companies.”
Yahoo Finance's Aaron Pressman also points out that the public price would be below the $2.4 billion valuation of its recent round of private capital last year, tempering the exuberance that can taint a hot IPO. Overall, the U.S. IPO market has become more conservative, Renaissance Capital notes. On average 40% of IPOs priced below the range in 2014.
As for day-to-day business, Box is not making money. The company had a net loss of $121.5 million in the nine months ending Oct. 31, on revenue of $153.8 million. That risk is clearly spelled out in the company prospectus. “We have a history of cumulative losses, and we do not expect to be profitable for the foreseeable future.”
While that may not be a glowing forecast, Smith says its not unusual for tech startups. “They’re counting on the fact that the investment they make in customer acquisition, and in this case they are very large Fortune 500 companies," like Procter & Gamble (PG) and St. Jude Medical (STJ), "will pay off down the road in high cash flow and earnings instead of losses.”
Box’s IPO is expected to price Thursday with trading to begin Friday. Shares will be listed on the New York Stock Exchange (ICE) under the symbol (BOX). The deal will be an early barometer for tech IPOS this year which may include Airbnb and Snapchat.
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