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Dropbox Amendment to Form S-1 (sec.gov)
106 points by obi1kenobi 7 days ago | hide | past | web | favorite | 53 comments

Other interesting excerpts:

- "Salesforce Ventures LLC has entered into an agreement with us pursuant to which it has agreed to purchase $100,000,000 of our Class A common stock in a private placement at a price per share equal to the initial offering price."

- "Following this offering, outstanding shares of Class B common stock will represent approximately 98.0% of the voting power of our outstanding capital stock."

Class B shares get 10 votes per share, so presumably reserved for the founders. This seems to be a very high fraction.

It is typically class A that gets 10 votes per share. Does the S-1 say otherwise?

[edit] yep, you're right...

- "Shares of our Class A common stock are entitled to one vote per share."

- "Shares of our Class B common stock are entitled to ten votes per share."

From MarketWatch...

As is the norm for tech companies going public these days, Dropbox has multiple classes of shares with different voting rights. Class A shares have 1 vote, Class B shares have 10 votes, and Class C shares are nonvoting. MarketWatch pointed out last week that Dropbox's structure still gives heavy voting power to the founders and key investors, but it's "slightly" better than the one rolled out by Snap a year ago, in which ordinary investors don't get any voting rights.

- Cofounder and Chief Executive Drew Houston owns 38.3% of the class A shares and 24.3% of the Class B shares, for 24.4% of the total voting power.

- Venture-capital firm Sequoia Capital actually has more power than Houston, with 25% of the Class B shares and 24.8% of total voting power.

- Cofounder Arash Ferdowski has 9.9% total voting power, mainly consisting of Class B shares.

> - Venture-capital firm Sequoia Capital actually has more power than Houston, with 25% of the Class B shares and 24.8% of total voting power.

It's likely this will immediately dissolve as these shares are distributed to the investing fund's LPs.

Condoleezza Rice


Didn't realize Condi was on the Dropbox board of directors.

Her joining Dropbox was discussed 4 years ago: https://news.ycombinator.com/item?id=7565546

That was a very realpolitik like hire.

Yeah I just did the math on this (systems of simultaneous equations FTW) and this comes out to almost 17% class A and 83% class B.

So we have:

- 36M class A shares @ $18/share = $745m

- $100m of class A shares at the IPO price in a private placement. This is roughly 5.55m shares and how the figure gets to 41m shares and change

- I don't know how many unissued class A shares there are but given that there are 41.5m being issued, this implies there are AT LEAST 245m class B shares outstanding, which seems... kinda high.

- Additionally, Dropbox has raised >$1.7b in VC [1] over the last decade. What class of shares have these investors gotten? B or A? If it's A then there are a whole lot more B shares outstanding. If it's B then that too is curious.

Unless we're misunderstanding what 98% of the voting power means here?

EDIT: Oh there's a table ("THE OFFERING").

- 26.8m class A shares being issued it looks like?

- 9.2m class A shares being offered by existing stockholders.

- It's unclear to me if the Salesforce private placement is from existing stockholders or a new issuance.

- 53.7m outstanding class A shares after this offering;

- 339.3m (!) outstanding class B shares

- 5.4m outstanding options to purchase class A shares

- No outstanding class C shares after this offer. One wonders what class C was. Stapled shares to class B that converted to A?

So it looks like this would value Dropbox at close to $8b (393m outstanding shares plus the options plus 30-35m shares IPOed).

For a gross profit for 2017 of $737m (from $1.1b in revenue; that's one hell of a profit margin) that all looks pretty healthy. In fact, i wonder why the price is as low as it is? Although they are spending that on R&D and the like.

EDIT2: Ya know, I realize commenting on downvoting is not a thing here but I have to ask: why on earth is this getting downvoted??

[1]: https://www.crunchbase.com/organization/dropbox#section-lock...

It's a software company - gross profit is almost meaningless. In reality they made nowhere near $737m.

No idea, but I just up-voted you. Your post was helpful to me. Thank you and have a good day.

It’s not uncommon, from my understanding, for founders/families to have almost all of the voting control in a public company. I think it’s a misplaced assumption that the public has a proportional interest in voting equal to their amount of shares, or % ownership.

It’s not uncommon today, but was virtually unheard of until Google did it.

Yes it was. See Newspapers/media barons.

Weren't those usually private companies?

Which ones?

NYT is big one that I know, but others include:

News Corp, Sinclair, WaPo, NYT

Other media companies in general.


> It’s not uncommon, from my understanding, for founders/families to have almost all of the voting control in a public company.

Less than 1% of public stocks in the US have that arrangement. It's extremely uncommon.

Among public companies with market caps above $5 billion, there are extraordinarily few stocks in which founders/families have almost all of the voting power. You can count them on one hand.

I don't understand why it isn't illegal.

Because if you don't like the idea you don't have to by the security.

And, as it happens, so many people own equities passively (through a managed mutual fund, or an index fund, retirement account and the like) and ownership of a company is so diffuse, these provisions have little impact in practice except against another large entity.

I'm not defending the practice -- I think it is a bad management practice myself and don't buy stocks with such provisions -- I'm simply responding to your comment.

I would argue that its publicly available information so why should it be? Anyone who knows this in advance and still buys the stock is making a (theoretically) informed choice to give up control for a share of profits (hopefully). It's all part of the risk calculation in investing.

Wall St. hasn't punished most tech stock prices for this practice (yet). Seems to be an unspoken rule that when it comes to tech companies, the founders know more than the street analysts.

Yes they have! [1] Dual- class listing now miss out in huge daily price-insensitive purchases from ETFs driving their stock up.

[1] https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b...

Because there is zero reason why it should be. You can get this information before you make your decision to buy.

In a phrase, "because it's a free country".

> Class B shares get 10 votes per share

Well that's a bummer, I guess that rules out Dropbox from my consideration of places to invest. (Which, given current prices, is pretty small.) I can't invest in a company that wants investors money but won't give them anything in exchange for it.

> I can't invest in a company that wants investors money but won't give them anything in exchange for it.

Other than financial returns, you mean?

A lot of people consider greater fool assets to be financially unsound, no matter what their historical performance might be.

Stocks typically provide real value in up to 3 different ways. First is paying dividends. Second is voting power. Third is liquidation preference.

Many new tech stocks provide none of those. All they provide is a hope that some fool in the future will pay more for them than you did.

As long as we're in a bubble, those greater fool stocks will keep going up. Sooner or later, the bubble will end. Some people consider it financially unwise to depend on the continued existence of a bubble for their financial positions.

It's one thing to argue that an investment is a bad one. It's quite another to say that limited voting rights mean you're "getting nothing in exchange for your money". I don't think you've adressed that claim at all... So what's your point?

Risk factors look interesting: https://www.sec.gov/Archives/edgar/data/1467623/000119312518...

> As of December 31, 2017, we served over 500 million registered users but only 11 million paying users.

> We have incurred net losses on an annual basis since our inception. We incurred net losses of $325.9 million, $210.2 million, and $111.7 million in 2015, 2016, and 2017, respectively, and we had an accumulated deficit of $1,049.7 million as of December 31, 2017.

> However, our rates of revenue growth are slowing and may continue to slow in the future.

I thought they were better off. Or is it usual for startups when they go into IPO?

Market cap is expected to come in around 7.5B, which is 25% below the last private round. Is somebody getting a haircut here?


Any idea when they are going to ring the bell? I want to get in very very early on this one. Very early.

CNBC said the execs and bankers are going to be traveling to NYC and Boston this week to pitch to investors, and it is scheduled to be trading "late next week."

TechCrunch is saying this month: https://techcrunch.com/2018/03/12/dropbox-ipo-range/

However, I was under the understanding this process takes 2-3 months.

Very very early was a decade ago when they were looking for investors :)

Why? What avenues of growth do you see that they have not explored?

just because they want to get in early doesn't mean they want to hold long term. If everyone did "firm foundations" the markets would vaguely make sense but I feel like the "castles in the sky" is often more prominent which is a big part of why markets are so noisy and hard to read.

Jesus Christ! What is wrong with people here on HN? Why am I being downvoted for asking when a stock is going to start trading? Wow

It can be vexing when people downvote your comments but please don't break the site guidelines by going on about it. That only ever makes the thread worse.


Perhaps because it's not an interesting comment.

Attempting to find out when a stock starts trading in a thread about an IPO isn't interesting?

It's 1999 again


Dropbox is ycombinator alum. A ycombinator alum doing an IPO is worth bragging about on the front page.

For those of us not on your level, can you explain?

Dropbox has always been a bit of a mystery to me. Always eating resources, can't provide changelogs, and terrible customer service. File sharing services are a dime a dozen now, heck Nextcloud is free and does more than Dropbox. No one just uses Dropbox anymore unless it was forced on their phone through some backroom deal. If anyone tries other providers they wouldn't switch back, there is no reason to anymore. They have nothing valuable to offer at this point but they want to make sure to grab as much money as they can on their way down.

You're being incredibly mean-spirited in your comments.

More importantly, you're wrong. Lots of people (myself included) use and love Dropbox, and find it valuable.

You're not actually saying anything specific in your comment, just "it's not valuable". Do you want to offer actual criticism?

Just said.. it always eats resources, no changelogs, and customer service doesn't respond (even when I was a paying customer).

It just works everywhere it's installed, on every platform, and has a long history of doing so. For something as critical as what they provide, that's the most important feature.

What are their user / revenue figures like?

I have a few qualms with Dropbox... https://news.ycombinator.com/item?id=8863

I see this comment quoted a lot in a jeering way, but always just the first two points. Number one is a little silly, two has some validity, three is pretty correct (there was no way to pay for it!) And the commenter answers the response to it well.

Also 2007 HN looks like a very different kind of environment. Everyone's so polite! Comments happen over several days! It's more like a feedback on a design doc than a Twitter thread.

HN was a great place back then. I made many useful professional contacts, and had a lot of interesting and deep conversations. It was like (site that shall not be named) is today, except with a bit more focus on turning the tech into a business.

There were some subtle shifts, as front page posts started being more for people who think startups are cool, and less for people who want to figure out how to make their startup win. Then there was a big shift, as diggers fled to reddit, and redditors came to HN.

Now, HN is comparatively useless.

Little silly how? They literally provide no information about their changes. How many phones do you think they were forced onto? I guarantee you a majority of their subscribers are soon to join their OS providers native file sharing service, and for good reason. Google Drive provides an entire online application stack for third-party developers and a simple API. Google Photos is great as well, as it has the best object and face recognition software.

OneDrive actually does the same pretty well too, and integrates with their native Office Suite. There is really not a good reason to select Dropbox at this point, unless you are just working PR for them.

Because it's a YC start up.

..is implied it will go up to 1 billion by EOD IPO.

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