Can Spotify and Dropbox Restore Faith in Tech IPOs?

The message to investors from Spotify last week had a familiar ring for any veteran of the tech gold rush: "The trend towards profitability is clear."

The music streaming service is hoping to banish the memory of a difficult year for technology flotations. Similar promises of digital alchemy -- heavy cash investment transforming into an ever-burgeoning bottom line -- followed the stock-market launch of Snap last year. So far, investors in the owner of Snapchat have been underwhelmed, but last week 35-year-old Daniel Ek, Spotify's co-founder and chief executive, was adamant that his music streaming service would deliver the kind of returns that have proved elusive for tech upstarts since the blockbuster float of Facebook.

The test for Stockholm-based Spotify will come when it floats in New York on 3 April, while Dropbox, the online file storage company, is preparing to launch its initial public offering this week. Those companies must answer two simple questions: will Spotify ever go into the black and justify the near-$20bn valuation that private trades in its shares put on it; and is Dropbox really worth between $7bn and $8bn ?

With both companies preparing to join US stock markets, they could determine whether investors regain their enthusiasm for new technology stocks after a disappointing year in 2017, during which Snap, meal-kit company Blue Apron and big-data business Cloudera all went for public listings -- and disappointed. Shares in Snap are down a quarter since it floated -- a poor performance for investors hoping it would emulate Facebook, which has risen nearly 400% since it floated in 2012. (Twitter, meanwhile, finally recorded its first quarterly profit last month, five years after going public.)

One analyst thinks the latest flotations will restore faith. "Spotify and Dropbox have a very good chance of success because the technology world is about one...

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