April 15, 2014
By Marc Fogarty, CPA, CFE
Box, an online file management company, is following a trend of several other companies who filed for an IPO within the past 12 months. There are many similarities in these companies--let’s take a look at what these similarities are and what they may mean for other companies thinking about an IPO.
Box, like Twitter, confidentially filed for an IPO. As I mentioned in an early blog about the JOBS Act and the confidential filing of IPOs, this is an attractive option that might be driving companies toward IPO as a source of funding. With a confidential IPO, a company can keep much of its sensitive financial information, which a competitor like Google or Microsoft might want to see, out of the public eye until shortly before shares begin to trade.
Another theme that is pervasive with the latest Tech IPO is high valuations with low to nonexistent profit margins. Box was valued at $2 billion in spite of lack of profitability and the company’s regulatory filing stating, "We do not expect to be profitable for the foreseeable future."
Box has heavy competition in the marketplace with Google, Amazon and DropBox, but it is interesting to note that 40% of Fortune 500 companies are already using Box. While Box is depending on future cash to expand its services and offerings, it may be easier for cash-rich companies like Google and Amazon to quickly catch up.
Another point of interest is that Box is another tech company using the NYSE, rather than the NASDAQ, but I see this choice as a possible marketing move. The NASDAQ symbols are 4 letters and NYSE are 3 or less and since the company’s name is “Box” it may have wanted to preserve that branding.
Between the confidential IPO filing, the high valuation without reporting a profit, heavy competition and choosing the NYSE over the NASDAQ, BOX seems to be following the recent trend of other Tech IPOs. Many are thinking, is this all leading up to another bubble burst? That will be the focus of my next blog.