By Benyamin Davidsons
Elliott Management Corp. has taken a sizable stake in software company Dropbox Inc. As reported by the Wall Street Journal, Paul Singer’s activist hedge fund, is now Dropbox’s largest shareholder, after Chief Executive Officer Drew Houston. Elliot Management has reportedly been in talks with the company since early 2021. The fund has recently notified the company about its large stake, which is estimated to be worth well above $800 million, or at least 10% of the total company, though exact details were withheld.
The file-sharing app went public in March 2018, and has been mostly trading below its Initial Public Offering price of $21 per share since then. Last Wednesday, after Wall Street first heard of Elliot’s handsome stake, the stock price jumped and was at $28.11, up some 7 percent. Dropbox has an estimated market value of roughly $11 billion. Compared to other cloud companies including Salesforce.com Inc. and ServiceNow Inc., Dropbox has a modest valuation, which makes it a good candidate for a takeover.
CEO Houston, who co-founded Dropbox along with Arash Ferdowsi in 2007, holds majority voting control. As per FactSet, the company’s next-largest shareholder was Vanguard Group, with an estimated 9.7% stake. The firm’s cloud-based storage lets users store documents, photos and videos online. The company also has a less popular software, allowing teams to edit centralized documents. As of March, Dropbox also purchased DocSend, and in January 2019 it also purchased the signature startup HelloSign for $230 million. Dropbox boasts over 700 million registered users. Last year it reported revenue of $1.9 billion, up 15 percent.
As per the WSJ, activists usually chose to stay away from companies with powerful founders who create their own alliance of shareholder backing. But Elliott, founded in 1977 and now one of the oldest funds of its sort, has already boldly invested with many such companies with strong founders, including Twitter Inc., SoftBank Group Corp. as well as several breakaways from Dell Technologies Inc. Elliott Management has over $40 billion under its control.
Other cloud companies have also been purchased of late in a spate of tech acquisitions. Last week, Cloudera Inc., agreed to sell itself to private-equity firms KKR and CD&R for $5.3 billion. Last year, Salesforce purchased Slack Technologies Inc. for $27.7 billion.
A representative for Dropbox did not immediately respond to a request for comment.