Box’s Conservative IPO Pricing Is Not Surprising

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Today Box priced its IPO with a proposed range of $11 to $13 per share. Box intends to sell 12.5 million shares in its offering. Its road show comes after a long delay in the company’s offering, during which it raised an additional $150 million of capital.

According to the current filing, its maximum aggregate sale is $186.9 million. Box originally filed to raise as much as $250 million.

The $11 to $13 price band values the company at more than $1.5 billion. That’s a sharp decline from its last private valuation of around $2.4 billion. So is Box making a mistake, or leaving too much money on the table? I don’t think so.

Allow me the following, indulgent self-quote:

[Then-recent tech IPO] Hortonworks originally priced quite conservatively, and then raised its target range before enjoying a strong first-day performance. For what it’s worth, New Relic also priced small and boosted its share price ahead of its IPO.

It would therefore — and this is merely speculation on my part — not surprise me to see Box do something similar. It could even price its range at an implied down valuation. However, that number, if it sticks, could be annoying to some its shareholders who may desire quicker reduction to their exposure to Box.

If investor appetite is strong, Box can raise its range moderately and still have a good first day. Of course, it could be that Box is pricing as it is because it has to, and no other reason; the company remains unprofitable and its growth is slowing, though I think roughly in-line with expectations given the law of large numbers.

Box responded to inquiry with a stock statement: “We’re incredibly excited for the coming year and the next phase of Box’s growth. As always, our goal is to deliver amazing technology that transforms the way individuals and businesses work.”

Going public is an ordeal for any company. For Box, it has been a case-study in The Struggle Bus. Because of the company’s high profile inside of the technology market, it has been used a barometer for other firms, placing its every move under heavy scrutiny. To finally get this offering live will be, I suspect, quite a moment of relief for Box.