Box rides high on Wall Street’s warm welcome

The company's shares on Friday traded as much as 77 percent above the set IPO price.

Box CEO Aaron Levie and others at the open of the New York Stock Exchange as the company's shares begin trading

Box CEO Aaron Levie and others at the open of the New York Stock Exchange as the company's shares begin trading

Box made a splashy entrance on the New York Stock Exchange Friday, opening at $20.20 per share, or 44 percent higher than the price it had set for itself the night before.

With 12.5 million shares for sale, the initial public offering raised some $175 million that Box can now use to invest in its business, and a market capitalization of $1.6 billion.

By Friday afternoon, the stock -- trading under the symbol "BOX" -- had reached as high as $24.73 per share, or 77 percent above its IPO price.

"It was unbelievable," said Steve Sarracino, a founder and partner at Activant Capital, noting that current prices were giving Box a valuation on a par with the $2 billion it saw in its last private funding round in July.

"We were watching closely because for the first time it looked like the public market was going to impose discipline on the private market, but they blew right through there. I don't know if it's good or bad, but it tells us the market is risk-on," he said.

Wall Street's warm reception can only come as welcome reassurance for Box, whose IPO journey has been a rocky one. After originally filing to go public last March, the company ended up postponing those plans, citing unfavorable market conditions.

Im skeptical, Sarracino said. With high marketing costs in particular, the company was burning through its cash faster than many investors like to see, he said, prompting some to push back. That, in turn, may have prompted the companys IPO delay, he said.

Now, however, not only does it look like Box has turned the corner in that respect, but the timing may have been better in other ways. Perhaps most notably, "there haven't been a slew of tech IPOs recently," Sarracino noted.

"People have had time to do the research," he said. "I also think there aren't a lot of places to go from a macro perspective in 2015. This could be a really strong year for equities."

Box's technology, meanwhile, is clearly a factor in its Wall Street success. "When it started, what it did was revolutionary in the enterprise market," Sarracino said.

Looking ahead, though, there's no doubt Box will have to move quickly. Storage is a commodity business, Sarracino noted, and Box will have to make sure customers see it as a provider of more than just storage.

"It will be important to continue to provide vertical apps on top of infrastructure," he said. "They already have some stuff, like basic apps for small businesses and a software development kit that developers can build on, but they need to do more."

It will need to create apps for functions such as collaboration and messaging, for instance, and they'll need to be tailored for specific industries. "They'll probably start horizontal, but they'll need to go vertical," Sarracino said.

"It's hard to get developers' attention right now, so they'll probably have to build a bunch of it on their own," he said. On the upside, "they're really well-positioned to do it, and investors are going to be watching very closely."

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Katherine Noyes

IDG News Service
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