Why the Box IPO matters
CNN/Money said, “Welcome to Wall Street, Box. What took you so long?”
Fortune labelled its 68% day-one stock gain as “The $120 million that got away.”
Jim Cramer spoke about the Box IPO this way: “Basically Box has cracked the code to file-sharing for the enterprise with a highly powerful and secure and scalable platform that’s extremely easy to use.”
Clearly, Box’s public offering was a meaningful event. It was the first IPO of 2015, and the first file sharing service to go public. There were those who thought that Box commanded an unreasonably high valuation for what they considered “just a large hard drive connected to the Internet.” However, many investors saw the truth – that Box’s predictable subscription-based revenue streams were reminiscent of Salesforce.com a decade earlier, and users are reaping real value from the services Box provides: data accessibility, security, protection, and collaboration.
By The Numbers
It took almost a year for Box to pull the IPO trigger. They filed their S-1 in March 2014, and since then the market was filled with chatter about what was taking them so long. In the end, they were just waiting for conditions to be right, and for investors to be comfortable with the company’s financial prospects. Ultimately, whatever they did worked, because the stock price skyrocketed up to $23.15 on its first day, well above the $14/share it was originally priced at. Since then it’s settled into the $18-$20 range, well above the asking price. And in the process, Box walked away with $175M for its coffers.
Validating The Business Of The Cloud
Box has further validated what Salesforce pioneered ten years ago – that subscription-based software companies make good investments. The entire field is being viewed favorably by Wall Street – not just the recurring revenue business model, but the infrastructure-as-a-service (IaaS) sector. Box has helped the financial community understand the dynamics of cloud business models. And in turn, they are ready to accept the way businesses like Box – and ours – do business.
Demonstrating That Cloud Is Crucial For Business
Meanwhile, the reaction from investors shows us that there is a belief that businesses are using the cloud, and will increasingly do so. In fact, people are betting that this is exactly what’s going to happen. That’s a big deal for cloud companies. Whereas consumers can be fickle in their selection of apps, businesses tend to lock themselves into providers for long periods of time, as they develop standard practices and workflows intimately tied to the vendors they choose.
Jim Cramer noted this when he said the following: “Box is not just about storing data in the cloud and sharing files. It has taken a different angle of storage, by creating an easy-to-use platform that allows file-sharing for colleagues to work on the same projects together. Heck, maybe you like DropBox better! I’m telling you, that does not matter. Box will still be the one to own.”
So Now… What Happens Next?
Obviously, it all depends on how the business and the stock perform, but so far things are looking pretty good. If that trend continues, it could mean that another set of IPOs will follow – from other filesharing services like DropBox to new and exciting Software-as-a-Service (SaaS) businesses serving the B2B space.
The public offering was just the beginning… let’s see what happens now.