Box Receives $150M from TPG, Coatue Ahead of IPO

Box, the company that provides cloud storage and file sharing services raised $150 million funding prior to its initial public offering (IPO) this year. The estimated market valuation of the company is $2.4 billion.

The new investment came from TPG Capital, a global private equity investment management firm headed by David Boderman and Coatue Management, a hedge fund led by Philippe Laffont, one of the protegees of legendary investor Julian Robertson, according to The Wall Street Journal.

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TPG takes a seat on Box’s board

According to people familiar with TPG Capital’s investment came from TPG Growth, its growth equity fund. The fund would have a representative to the board of directors of Box following the investment. TPG Growth general demands to companies where it has investment to guarantee that they would sell their share at a higher valuation in an IPO compared with its estimated valuation during the last funding round. A company will forfeit additional shares if it fails to sell shares at a higher valuation during its debut.
Sources said Box agreed to issue more shares to TPG Capital if it offers its shares during the IPO at a price lower than expected. That provision in the agreement between Box and TPG Capital is called “ratchets,” which is becoming a common practice because fast growing startups are delaying their IPOs for a longer period.

Box plans to go public after Labor Day

Box delayed its public offering amid uncertainties in the stock markets. The new investment would give the company flexibility in determining the right timing for its debut. One of the sources said Box is planning to go public by the end of the year. Box is targeting a schedule after the Labor Day because the IPO market seemed to accelerate after Labor Day until Thanksgiving.

Based on its regulatory filing, Box aims to raise $250 million from its IPO. The company disclosed that it was not yet profitable because of its heavy spending in sales and marketing.

According to Box, its sales and marketing expenses increased 73% to $171.2 million for the fiscal year ended January. The amount accounts more than 38% of its revenue, which ignited concerns among investors regarding the long-term viability of its business model. Such concerns prompted the management of Box to delay its IPO and wait for a better market condition.

Ashley Mayer, a spokesperson for Box previously stated that the company plans “to go public when it makes the most sense for Box and the market.”