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What Can We Learn from the Spotify and Dropbox IPOs?

Key Points
  • The IPO successes of Spotify and Dropbox may indicate that other tech giants are eyeing an IPO.

  • New paths to IPOs are being forged.

  • Younger traders may have a big impact on the success of tech IPOs.

When it comes to spotting the always-elusive initial public offering (IPO) Unicorn in the tech field, all eyes are typically focused on Silicon Valley. Despite the attention given to the high-profile disappointments of Blue Apron and Snap, the IPO market rebounded from a stretch of lackluster activity in 2017.1 And 2018 is shaping up to be a solid year for IPO investments, with Spotify and Dropbox among the well-known companies who took on the public markets amid a soaring bull market. So as we look ahead, what can we learn from Spotify and Dropbox and the IPO investment outlook in the tech sector?


Unlike with a traditional IPO, Spotify did not issue new shares, but rather sold a large portion of its existing privately held stock. Its unusual "direct listing" approach could possibly herald a new wave of technology startups eschewing Wall Street investors, and the more traditional IPO. Shares opened at $165.90 apiece for a $29.5 billion valuation, and closed 10 percent lower at $149.01 on the end of its first trading day.


Dropbox also took an unexpected path, highlighting its positive free cash flow and net-cash balance. The company had initially expected its shares to be priced between $16 to $18 a share. When priced at $21 a share, investors gave it an initial market valuation of $8.24 billion, and the company raised more than $750 million selling over 36 million shares. Shares rose 35.6% in their market debut on the Nasdaq exchange under the ticker symbol “DBX,” pushing the valuation to just shy of $10 billion.

The buyers

With so much going on in the tech IPO world, the question is: who is lining up to buy? By and large, the answer is millennials. Overall, millennials trade more often than non-millennials, but the average dollar amount per trade is half.2

Keeping tabs

Technology entrepreneurs may be watching closely. If they see the direct listing as promising avenue, other entrepreneurs could take note when considering their own IPOs and may become less interested in involving an investment bank to take them public.

Delaying the IPO

Many technology companies are putting off an IPO in large part because they're flush with money and can afford to do so. WeWork just raised a whopping $4.4 billion from Softbank. Airbnb secured another $1 billion. Pinterest added $150 million. With war chests like this, they're happy to delay the stress involved in putting together a public offering.

Next up

On the IPO deck are a handful of innovative and exciting tech giants including Uber, SpaceX, and Lyft, among others. Ride-hailing service Uber was given a notional value of $50bn in 2015, and the short-term letting agency Airbnb is already profitable.


1. Lauren Gensler, “The IPO Class Of 2018: Spotify, Dropbox And Other Unicorns Take Center Stage”, Forbes, 1/12/2018

2. Nathan McAlone, “Here Are The Stocks Millennials Love More Than People Over 30 Do”, Business Insider, 04/19/2017.

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