Dropbox raised the price range for its IPO

With the first day of trading underway, the Dropbox IPO is off to a healthy start, as stock prices climb over 40 percent.

The initial price range was quite conservative compared to the ratings of comparable companies, according to the analysts. An agreement with Salesforce, which offers corporate online services and is buying $100m of its shares, could give Dropbox a shop window for new business customers. Still, the selloff played a role, people familiar with the deal said.

Its IPO priced at $21 a share late Thursday - $1 above the projected range of $18 to $20 each and was several times oversubscribed.

At their highs of the day, shares were more than 50 percent above their $21 IPO price. On average, USA -listed companies have sold 39% of their shares in an IPO this year, while US -listed technology companies have sold 22% of their stock, according to Dealogic data.

That said, the firm has enough going for it to keep investors interested.

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Strong demand for Dropbox's shares could bode well for the long line of richly valued and privately held tech startups.

Dropbox surged by as much as 44% in its trading debut on Friday, marking a strong start to the most prominent tech initial public offering so far this year.

Candidates for IPOs have put listings off in an attempt to grow into the private valuations they have been given. The cloud-based file sharing company received $10 billion valuation during 2014 private funding round, slightly higher than the current valuation. Glaser characterized Dropbox in its current form as more of a commoditized, consumer-focused company than a competitor like Box, which specializes in enterprise storage. Popular for its cloud-based files storage and syncing service, the company was able to raise a whopping $750 million from the event.

Dropbox reported revenue of US$1.11 billion in 2017, up 32 per cent from a year earlier.

Though it is growing fast, with revenue showing a steady double-digit growth pace, Dropbox has yet to show a profit since it was founded in 2007. Andrew Houston, co-founder, and CEO of the company will have a share of 24 percent in Dropbox after selling 2.3 million shares in the offering. In order to increase revenues, it either needs to convert more users into paying ones, or encourage existing subscribers to upgrade.

  • Delia Davidson