Box Revives IPO Plans as Cloud Shares Recover
Timing is everything. And cloud storage company Box could not have picked a worse time to go public.
The March 24 public disclosure of Box’s S1 filing with the U.S. Securities and Exchange Commission landed shortly after a precipitous drop in the shares of cloud software companies. The decline in the sector, which wiped away nearly a third of the group’s value, derailed Box’s expected April timing for a public offering.
But sources familiar with the company’s thinking tell Re/code that as market conditions have improved, Box’s IPO plans are back on track, and it is hoping to complete its IPO by July or August.
Although it missed its earlier target, Box’s plan, sources familiar with the matter say, has never changed. There is no scenario being considered that does not include an IPO. And while there have been persistent rumors about a possible acquisition, it has ruled out a sale, these sources say.
A recovery in the sector has inspired Box to test the market again. An index of 37 publicly traded cloud companies tracked by Bessemer Venture Partners had, as of June 13, risen by more than 11 percent from a recent low in early May, and by more than four percent in the prior week alone. The index includes shares of companies like Salesforce.com, Workday, LinkedIn and Netsuite, all of which have risen this month.
The successful IPO of Zendesk last month as well as Mobile Iron and Arista Networks this month has given Box confidence to move ahead with its offering.
The next key step in the process will be an update to its S1 filing that includes financial results for the quarter that ended in April. The pace toward an IPO quickens shortly after that, with a road show and pricing likely soon to follow, sources close to the company say.
Last year, 21 companies opened for trading during the month of July, while 18 debuted in August, according to Renaissance Capital.
Should the sector fall again, Box would consider taking on additional funding from private investors while keeping its filing to go public active. In that scenario — currently being considered as only an outside possibility — a Box IPO might slide again, sources say, but only by a matter of weeks.
The company, headed by 29-year-old CEO Aaron Levie, initially filed for its IPO under the confidentiality provisions of the federal JOBS Act with Morgan Stanley, Credit Suisse and J.P. Morgan Chase running its process.
When its filing was revealed, most of the attention focused on the speed at which Box has been burning through cash. As of the year ended Jan. 31, Box reported a $169 million loss on revenue of $124 million. Its burn rate — the combination of marketing and operational costs — averaged about $17.5 million a month.
Levie has previously outlined plans to boost sales by relying more on third-party resellers and offering specialized services for specific industries.
On top of that, a deal announced last month to supply cloud services to GE suggests that Box can land some of the world’s biggest corporate customers. Any hint that more deals like that may be in the offing will go a long way toward soothing the nerves of potential investors as Box marches ahead to the public markets.