What's going on?

On another day of plunging stock prices on Wall Street, data storage company Dropbox bucked the trend on its first day of trading as a public company: its stock rose 35%! (tweet this)

What does this mean?

Dropbox�s timing was tricky: on Thursday, amid a 2.5% selloff in US stocks, it sold its very first shares to investors at a higher price than they were initially marketed (after the market closed, as is typical of an IPO). The market-wide gloom continued on Friday as Dropbox�s shares opened for trading, but investors� mindsets concerning Dropbox were far sunnier, as they hustled to get their hands on Dropbox�s stock.


Dropbox only sold about 9% of itself in its IPO, which limited the supply of the shares and likely contributed to its very strong first day of performance (perhaps sometimes it�s okay to sell yourself short).

Why should I care?

The bigger picture: Investors like a subscription model.

Dropbox offers its customers data storage (�in the cloud�) for free but charges a monthly fee if users store in excess of the free amount. Investors are attracted to this �software as a service� model because it provides a steady, predictable revenue stream � and, let�s face it, sometimes people simply forget to cancel subscriptions they don�t need! (We�re looking at you, Tinder Plus)

For markets: Dropbox is a growing company in a popular industry.

Cloud-based-software services have been among the darlings of Wall Street in recent years (Salesforce may be the best known example). And Dropbox has spent a chunk of money in recent years beefing up its infrastructure and extricating itself from the cost of Amazon Web Services � leaving it with growing revenues and margins. Also, Dropbox valued itself at a discount to other companies in the space, making it relatively attractive. All in all, it led to a very well received IPO.