Dropbox debuts, surges above IPO price

By IPOsFOXBusiness

Why Spotify decided to go public

Lead Edge Capital founder Mitchell Green explains why the music-streaming service Spotify chose to go public, arguing that the company wants to acquire more customers.

Dropbox made its highly anticipated trading debut on Friday with shares jumping above $30 right out of the gate, well above the initial offering price of $21 it selected on Thursday.

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This is a big test of investors’ appetite for big tech investments since Snap was somewhat of a flop. The next one will be Spotify, scheduled for its debut on April 3. Dropbox’s performance could be a prelude of what is in store for Spotify.

Baby boomers have long dominated America’s investing landscape, but that will change as the larger millennial generation takes over from the ageing population.

This new generation has different tastes in terms of investments versus their boomer parents, and companies are looking at ways to attract this new group of financial leaders to their stocks.

In the age of Facebook and Twitter, millennial investors have an affinity for tech. But, after being burned by a disappointing Snap (SNAP) IPO, will they pour money into the Dropbox and Spotify IPOs?

Spotify is differentiating itself right out of the gate. The company, which offers a music-streaming service, plans on eliminating banks as underwriters in a move that some are calling a “non-IPO.” The company will list directly on the New York Stock Exchange under the ticker symbol SPOT, removing the underwriters from setting an initial price, linking sellers and buyers and providing cash to stabilize the stock.

Spotify paid just $30 million to Goldman Sachs Group Inc., Morgan Stanley and Allen & Co. who will provide some of the traditional tasks of an investment bank, but in a less prominent way. This could be a major shakeup to Wall Street, with investment banks losing out on what is a lucrative business.

Last year, investors were burned when Snap went public. While shares rallied out of the gate they later flopped. Shares are currently trading around $16. The company debuted at $17 per share but quickly shot up 44% on its first day of trading before falling. Now, it’s up to Dropbox and Spotify to prove that investors still believe in the lofty valuations of new tech companies.

According to Dealogic, 37 IPOs raised $12.5 billion in 2017, a significant increase from the 26 that raised $4.3 billion in 2016.