Cloud enterprise company Box Inc (NYSE:BOX) launched their IPO near the end of January, and already they can lay claim to having a major institutional investor. In a filing with the SEC on Monday, it was revealed that Philippe Laffont’s Coatue Management has built a 9.99% stake in Box, reporting ownership of 1.25 million of the company’s initial offering of 12.5 million shares.
Coatue Management was founded in 1999 by “tiger cub” Philippe Laffont, who cut his teeth working at Julian Robertson’s Tiger Management. Laffont, who graduated with a Masters Degree in Computer Science from MIT in 1989 runs a tech-focused long-short equity hedge fund, which had an equity portfolio valued at just under $10 billion as of September 30.
The tech-focused nature of his fund, which includes major investments in Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and LinkedIn Corp (NYSE:LNKD), makes his interest in ten-year-old cloud storage company Box Inc (NYSE:BOX) not entirely surprising. The company, which is now valued at $2.1 billion, has been a darling of the venture capital community for years, receiving financial support from such notable investors as Mark Cuban and Andreessen Horowitz. All told, Box Inc (NYSE:BOX) received hundreds of millions of dollars in investment capital, which helped them hire top executive talent (including Google Docs creator Sam Schillace), increase their workforce, and expand internationally, into markets such as Japan and Brazil. Co-founder and CEO Aaron Levie was even named Inc.’s Entrepreneur of the Year in 2013.
Despite the hype, Box Inc (NYSE:BOX)’s IPO has thus far suffered from the same fate as several other tech IPO’s in recent years: a strong first-day pop, followed by a swoon, which, in the case of those earlier companies, sometimes lasted for weeks or even months. The initial batch of shares was priced at $14.00, which was actually higher than the expected range of $11 to $13. Regardless, the stock soared 61% to close the first day of trading at $22.55. It’s been a steady downslide in the days since however, though it is still trading well above the offering price, at $18.24 in Wednesday morning trading.
Coatue clearly feels strongly in the company, which boasts 32 million users, and whose revenue rose 80% to $153.8 million during the first three quarters of 2014, though its bottom line (a net loss of $121.5 million) was hardly affected by the leap in revenue. Despite rising revenue, there is still some skepticism about whether Box Inc (NYSE:BOX) and even its larger rival, Dropbox (which is also planning to go public later this year), can adequately compete with Google Inc (NASDAQ:GOOGL)’s Drive, and Microsoft Corporation (NASDAQ:MSFT)’s OneDrive, which have integrated services and don’t need to turn profits from their cloud services alone, allowing them to offer greater dollar value in most cases than the smaller, cloud-focused companies.
As mentioned, Coatue Management is the only known investor in Box Inc (NYSE:BOX) at this time, so it’s difficult to gauge the overall interest amongst our tracked funds. We can however look to one of their competitors, Rackspace Hosting, Inc. (NYSE:RAX), which went public all the way back in 2008. At the time, Rackspace had a terrible launch, with their share offering price of $12.50 per share (which like Box’s, was also below initial estimates) crumbling to just $10.00 by the end of the first day of trading, and falling under $5.00 a few months later.
However Rackspace has enjoyed tremendous success since then, peaking at nearly $80.00 in early 2013, and currently trading at $46.39 with a market cap of $6.61 billion. Institutional ownership is high, accounting for 83% of all Common Shares, which shows a lot of optimism not only for the company, but the sector as well.
Our tracked funds were extremely bullish on Rackspace Hosting, Inc. (NYSE:RAX) in the third quarter of 2014, with several opening new positions, and others greatly increasing their existing ones. Clifton S. Robbins’ Blue Harbour Group was the most bullish, with 9.10 million shares, a 159% increase from the previous quarter. Barry Rosenstein’s JANA Partners was next with 7.00 million, which was acquired entirely during that quarter, while Steve Cohen’s Point72 Asset Management was next with 4.67 million shares, a 45% increase.
Rackspace responded to their bullishness by soaring 41.23% since October 1, which is exactly why we follow and track the activity of our selected funds, a method which has been proven to outperform the market. We’ll be carefully tracking further activity on Box Inc (NYSE:BOX) in the coming weeks as well to see if the same indicators point to its own future success.
Disclosure: None
