What is the current Dropbox stock price?
The simple answer is there isn't a Dropbox stock price yet. Although the tech company consulted advisors in August 2016 about a public offering, an IPO date hasn't been set.
And without an IPO, there's no listing on a stock exchange and no stock price.
But because the Dropbox IPO is inevitable, we want to make sure our readers know everything about the company before it goes public.
What Is Dropbox?
Dropbox was founded in 2007 and is a hosting service that provides cloud storage, file synchronization, and personal cloud services.
It's convenient for clients to use because once files - text, videos, pictures, and more - are loaded to Dropbox, they can be accessed on any device (smartphone, personal computer, netbooks, and so forth).
Files are also highly secure through a special encryption process.
The company provides a "freemium" model - a setup where storage capacity is limited. It then offers upgrades at higher pricing points. It also has a paid model that varies in price depending on storage needs.
What Is Dropbox?
According to its website, it costs $9.99 per month to upgrade a Dropbox account for additional features. Users can save money by paying $99 for the year.
As of March 2016, the cloud storage company had 500 million individual users and 200,000 business clients as of July 2016.
And that massive user base is what has Wall Street so interested in the Dropbox IPO...
When Is the Dropbox IPO?
According to Bloomberg, CEO Drew Houston said DropBox's meetings with banks about a potential IPO in August 2016 were just exploratory.
Dropbox was most likely seeking parameters on a valuation because the value of the company is contested.
Dropbox had a valuation of $4 billion in 2011. After a $250 million round of funding in 2014, the company was valued at $10 billion.
Business Insider reports that T. Rowe Price Group Inc. (Nasdaq: TROW) purchased Dropbox stock for $19.10 per share in that funding round.
However, T. Rowe marked down its holdings in Dropbox by 51% and valued its shares at $9.40 as of Dec. 31, 2015. And according to The Wall Street Journal, Fidelity Investments, which purchased stock in Dropbox in 2012, marked down its shares by 20% in February 2016.
Because of these markdowns, investors have been asking us if it's too risky to invest in Dropbox stock when the company goes public.
We turned to Money Morning Director of Tech & Venture Capital Research Michael A. Robinson for the answer...
What You Need to Know Before Investing in Dropbox Stock
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For investors who want to buy Dropbox stock on the Dropbox IPO date, Robinson recommends placing a limit order.
"I generally tell retail investors to avoid buying an IPO at the open because the insiders have already made all the money available at the debut," Robinson said in October 2016.
"My exception to this rule is to put in a limit order that is fairly tight from the offering price. Otherwise the risk is you buy at the top and then go upside down. That's a big risk to carry with a new issue that hasn't hit the lock-up date," he said.
But Robinson also has a strategy for investing in newly listed companies that doesn't come with the volatile price swings IPOs are known for. This is suitable for more conservative investors, as it provides a much more diversified investment while still allowing access to IPOs.
Robinson advises investors purchase an ETF that will mimic the broader market for IPOs. It's the First Trust U.S. Equity Opportunities ETF Fund (NYSE Arca: FPX).
Because FPX is an ETF, retail investors can buy and sell it just like a stock.
And because FPX holds a mix of recent IPOs and well-established companies, it's diversified. That makes it less risky than owning just one stock.
According to FTPortfolios.com, here's how it chooses what to include in its holdings:
- The IPOX®-100 U.S. Index is a modified value-weighted price index measuring the performance of the top 100 companies ranked quarterly by market capitalization in the IPOX®Global Composite Index.
- The index utilizes a 10% capping on all constituents and includes the 100 largest, typically the best-performing and most liquid U.S. public offerings ("IPOs") in the IPOX®Global Composite Index.
- The index is a rules-based, value-weighted index measuring the average performance of U.S. IPOs during the first 1,000 trading days. Index constituents are selected based on quantitative initial screens.
- The index is reconstituted and adjusted quarterly.
But it balances risk by holding well-known companies like Kraft Heinz Co. (Nasdasq: KHC).
For example, if FPX just owned shares of SNAP, FPX would be down 8.64% so far in 2017. However, the Kraft Heinz stock price is up 3.12% so far in 2017, and it accounts for a much larger position than Snapchat.
KHC is First Trust's largest holding, consisting of 9.86% of its portfolio. In comparison, Snapchat only accounts for 1.34% of FPX's holdings.
And for investors looking to outperform the market with safe investments, FPX is beating the Dow right now.
This year, FPX has climbed 8.41%. In comparison, the Dow is up only 6.05% in the same time.
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