Box Inc. had an excellent coming out party as a public company today.
Box priced its initial shares at $14 Thursday. Those shares today opened at $20.20 on the New York Stock Exchange and rose to high of$24.73 before settling to $23.23 at the close. That means Box shares increased about 66 percent on the day. Not a bad showing for a stock that was priced at $14 a share and a company that has yet to show a profit.
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“They got the kind of pop that everyone wants with the IPO,” said Terri McClure, senior analyst at Enterprise Strategy Group. “Wall Street is intensely enamored with cool companies. Box has done a great job of promoting its brand and paying attention to different method of file sharing.”
Box raised $175 million on its first day on the stock exchange. It followed a 10-month wait after the company filed its registration for an IPO last year, but found the market was cool to IPOs. In the interim, Box raised $150 million in funding last July from TPG Capital and Coatue Management LLC to give it flexibility on the timing of the IPO.
Box’s total losses have hit $482.7 million during its history, including $121.5 million of losses during the first nine months of 2014. Its revenue for the first nine months of 2014 came to $153.8 million. Despite the losses, Box is showing revenue growth quarter over quarter and the marketing spend is lower than revenue.
“Those two areas are heading in the right direction,” McClure said. “(But) there is no clear path to profitability.”
The company is valued at about $2.7 billion, above the $2.4 billion valuation it received in a July private-funding round. At present, Box is the darling of Wall Street but they still have challenges to overcome. Around 90 percent of its customer-base uses Box’s free consumer product ,so it has to convince enterprise customers that Box can be trusted with their corporate data. Box will face some headwind on that front, especially with all the recent security breaches.
Box needs to expand its user base beyond the United States, said McClure. That has gotten more difficult since the Edward Snowden leak. Box’s service holds both the data and the encryption keys to the data. A good 50 percent of Western European customers have policies in place that restricts them from storing data in the United States.
“We all know that corporations ane skeptical. They want some control and say on where their data is located, ” McClure said. “When we talk to end users, they are looking for hybrid cloud (services). “I do believe that the future is cloud but I don’t think customers are ready for it in their heads. I don’t think that the enterprise is ready for it today.”
Box is further ahead on its security compared to competitors like Dropbox. The company continues to evolve with more content management technology and now is focusing on delivering services to certain vertical, mainly finance and healthcare.
Meanwhile, many are waiting for DropBox, Box’s closest competitor, to file for an IPO.
“Everyone is expecting it to happen within the next year or two,” McClure said.