Elliott Management Corp. has taken a sizable stake in software company Dropbox Inc., DBX 3.92% the latest target for the activist hedge fund, according to people familiar with the matter.
Elliott has told Dropbox it is the company’s largest shareholder after Chief Executive Officer Drew Houston, the people said. That suggests the hedge fund owns a stake of more than 10%, worth well over $800 million. The two sides have been in talks since earlier this year.
Dropbox, a cloud-computing company with a market value of roughly $11 billion, went public in March 2018 and has been trading below its IPO price for most of that time. Its modest valuation compared with those of other cloud companies such as Salesforce.com Inc. and ServiceNow Inc. has made it the subject of persistent takeover speculation.
That chatter intensified after Salesforce agreed to buy Slack Technologies Inc. last year for $27.7 billion. Other cloud companies have also gotten scooped up recently, including Cloudera Inc., which agreed to sell itself to a pair of private-equity firms earlier this week. Activist Carl Icahn is a big Cloudera shareholder.
Dropbox’s primary offering is cloud-based storage, which allows users to store documents, photos and videos online. The company also has an offering that allows teams to edit centralized documents. It also owns DocSend, purchased in March, and HelloSign, which facilitates digital signatures.
Dropbox reported revenue of $1.9 billion last year, an increase of 15%, and has more than 700 million registered users. In May, the company said its first-quarter revenue rose 12% from the previous year. It also announced a new $1 billion share repurchase authorization in the first quarter.
Investors have questioned the company’s growth prospects as services it provides become commoditized and it does less business with lucrative corporate customers than many of its peers. Dropbox laid off around 11% of its workforce in January, not long after the company told employees most of them could work remotely indefinitely.
Mr. Houston, who founded Dropbox with Arash Ferdowsi in 2007, holds majority voting control. The company’s next-largest shareholder is Vanguard Group, with a roughly 9.7% stake, according to FactSet.
Activists have historically steered clear of companies with powerful founders given that their work usually depends on being able to build a coalition of shareholder support. But Elliott has broken that mold with past investments in Twitter Inc., SoftBank Group Corp. and various iterations of computer-and-storage giant Dell Technologies Inc., all of which featured founders with significant stakes and were relatively friendly investments.
Elliott, with more than $40 billion under management, is one of the busiest activist investors. It also has a private-equity arm, Evergreen Coast Capital, that sometimes bids on companies that are targets of the firm’s activist campaigns.
Write to Cara Lombardo at [email protected]
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