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Dropbox Shares Offered at 34% Discount in Secondary Market
- bby 11y agomax short once this goes public
- dharmon 11y agoThe last raise was two years ago, so if you figure the current valuation based on recent markdowns, then this price is more inline with what you might expect from common equity vs. preferred. I am curious, will these secondary shares have the same lockup restrictions that employees face after the IPO? I am also curious how the market will price Box vs. Dropbox. I would expect them to mostly move in tandem, but with Thiel propagating his "myth of the monopoly", maybe people will consider any positive developments at one to be negative for the other? At any rate, I expect it will be rough roads ahead.
- frogpelt 11y agoBuzzfeed is reporting stock offerings? Who knew?
- jsprogrammer 11y agoBuzzfeed would likely report anything people would click on.
- jfoutz 11y agoBuzzfeed news is pretty good. You won't believe how they fund serious journalism. #8 will shock you. But seriously, they do seem to have a commitment to producing quality news. [1] for example. [1] http://www.nytimes.com/2013/10/22/business/media/buzzfeed-hires-pulitzer-winner-to-head-investigative-unit.html?_r=0 http://www.nytimes.com/2013/10/22/business/media/buzzfeed-hi...
- throwaway7798 11y agoI strongly disagree. They produce a lot of biased news geared against startups in Silicon Valley. It almost feels like they're anti-startup news feed. And reading them, as an employee of a startup makes me feel pessimistic and depressed.
- B1FF_PSUVM 11y agoNews in general will make you feel pessimistic and depressed. If not enraged. Don't do news.
- jfoutz 11y agoMedia diet is important. IMHO staying aware of local, regional national and global "stuff" is kind of nice, it makes it much easier to be social. Occasionally I encounter stuff I want to know more about. But it takes a light touch. 15 to 30 minutes a day is more than enough.
- bogomipz 11y agoYep and ditto for that shit pile known as Gawkwer Media. Techcrunch is another one to be avoided. As far as I can tell the only tech bubble that exists is the one these media companies keep trying to drag into existence.
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- gyardley 11y agoWhen the company's raised a ton of money, the common's behind a ton of preferences, and in a time when there's no IPO window in sight, a 34% discount to the preferred doesn't sound particularly terrible or notable to me. Slow news day, I guess.
- mikekij 11y agoThis isn't surprising to me at all. Investors that previously valued the stock at $19 per share likely have a 1X liquidation preference. The employees' shares sold on the secondary market won't have this liquidation preference. So VCs are paying a 34% premium to basically guarantee a 1X return. Makes total sense.
- sharkweek 11y agoIf I'm an employee at [HIGHLY VALUED PRIVATE COMPANY] - this looks REALLY appealing to me, to dump my shares for at least a nice guaranteed cash out now. So many VC rounds protected with liquidation preferences at a valuation that the market probably ends up shredding if there's an IPO or a buyer comes along to acquire the company. These latest devaluations certainly wouldn't help with morale and I'd get nervous thinking about my shares eventually being worthless if the company just sort of tinkers in the private market much longer. I also tend to be relatively risk averse though, so I'm curious what others here would do.
- p4wnc6 11y agoMost employees would be in a situation where right of first refusal means their employer would have to approve this -- and in a lot of places, the employer's going to take it as a red flag that you want to sell and it could create problems.
- state 11y agoCould someone (perhaps with a throwaway or a 'wink') corroborate or elaborate on this? I'm very curious to know (anecdotally) how the politics of these sales work.
- joshjkim 11y agoThis is a copy/paste from a prior HN discussion that I had: [it's definitely true] that employees are discouraged from seeking buyers because there is an unspoken implication that this means the employee is "losing faith" or "believes less" in the company, or is getting ready to leave. If the party line is: "hey, we are going to be a billion dollar company!" and then one employee says "hey, I want to sell at this $100M valuation", even if the $100M is a solid upside from the employees strike price the next natural question for the founder is: "hey, why would you sell at this valuation if we all know we are going to unicorn?" Lots of people are reasonable and could understand many good reasons to sell at that point, but in high-growth culture those are not always appreciated. Sure, employee can/should suck it up, but it still makes it more challenging. Generally, I think this is why company's should more regularly organize secondaries, it removes this dynamic to a certain extent.
- SilasX 11y agoIs this a normal discount? I thought a typical one was more like 50%, making this a good deal.
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- ChuckMcM 11y agoWhile it think it is great that Dropbox is allowing its employee shareholders the ability to get value for their shares, the real story will be whether or not the shares actually sell. That will depend on a variety of things of course, not the least of which is how many shares are offered, but it will give management a useful way to evaluate the practicality of trying to go public or not.
- jpmattia 11y ago> the real story will be whether or not the shares actually sell. As the saying goes: There ain't nothing that price won't fix.
- putlake 11y agoAs others have noted, you could attribute the entire 34% "discount" to the fact that these are common shares, not preferred. A few months ago when I looked into investing in Palantir via EquityZen/Sharespost, the share price being offered valued Palantir at between 25-30% less than their most recent funding round valuation of $20B. If anyone's interested in acquiring pvt company shares in the secondary market, here's what I learned: * You have to be an accredited investor (i.e., net worth of over $1M excluding residence; or income of >$200K individual/>$300K married for the last 2 years and reasonable expectation that this income level will be sustained this year). * You don't actually own common stock of the company (e.g. Palantir). It actually works like a mutual fund. You invest in an LLC that owns the stock. You get shares in this fund/LLC that correspond 1:1 to common shares in Palantir. * There is usually a minimum investment amount e.g. $50K or $20K. * EquityZen/Sharespost charge a commission (of about 5% iirc; 1 of them charged more than the other but had a lower minimum investment amount). They are managers of the LLC and investors have virtually no rights even though they are members of the LLC. * When the company IPOs, your LLC shares are converted to the same number of company shares. This is common stock, and subject to the same lockup restrictions that employee shares are. That means you can't sell until 6 months after the IPO. * There is no liquidity. EquityZen and Sharespost differ in this a little bit. But basically you can't sell your shares in the LLC without approval from EZ/SP; they can veto it and they can also require a holding period of 1 year. * While the transaction is blessed by the underlying company, they don't reveal any information about financials or risks like they would in an IPO prospectus. You are investing blind. In my opinion the biggest problems with such investments are (1) illiquidity, and (2) the fact that shares are subject to 6-month lockup post IPO. EDIT: formatting.
- msoad 11y agoThe bigger story is that Dropbox is trending down in general. Look at Google Trends[1] for Dropbox searches. I used to have files. But now I don't really have any files. I use Spotify for music. A collection of streaming services for movies and shows. Google Photos for my photos. Google Docs for storing my spreadsheets and "word" documents and Google Drive to dump some useful PDF files. I don't pay for any storage service anymore. World has changed since Dropbox came out and it has become less relevant. In my case it is completely irrelevant. [1]https://www.google.com/trends/explore#q=Dropbox https://www.google.com/trends/explore#q=Dropbox
- state 11y agoWhat I really want is a Dropbox for all that structured data. I understand I can't really 'capture' Spotify, but I want some where I can actually put this stuff to work. IFTTT soft of captures this sentiment, but it's not nearly as powerful as the filesystem. It's like pipes with out a hard drive. It's interesting to consider whether you could apply part of the Dropbox approach to streams of data. Having them singularly controlled by the service you get them from strikes me as sort of limiting and underpowered. But hey, I'm in the minority. I like building stuff and feeling in control of the content I create — even that which gets created passively or implicitly.
- avelardi 11y agoAlso factor in their limited services. Why would I use dropbox when I can use a service such as Google to handle multiple services in one place? Also, file storage is a commodity at this point. Differentiating your cloud storage solution from the others only matters when you offer something other companies do not.
- andrewstuart2 11y agoWe should really stop looking to Google Trends to infer the popularity of a subject (something I've been guilty of as well!). The number of searches can't be completely correlated to the popularity, because as word-of-mouth and general knowledge of a service builds, the more likely people are to go directly to that service and not perform a Google search. Additionally, Google trend numbers are relative to all historic search activity. As Google's market share changes over time, that's likely to impact what Trends shows as well, skewing the correlation with subject popularity even further.