The vulture has struck again, and this time the vulture is Elliott Management, the activist hedge fund known for picking fights with tech companies including Jack Dorsey-led Twitter. This time, the target is Dropbox, which Elliott has bought a big position in, The Wall Street Journal reports.

• According to reports, Elliott has built a stake of more than 10% in Dropbox, making it the biggest shareholder after CEO Drew Houston. That stake is sufficient to start a fight with the company’s leadership.

• It was sort of the writing on the wall that Dropbox would be a target for activist investors. The company’s stock price has stayed stagnant since it became public in 2018, now trading at around $28 compared to its market debut price of $29.

• Dropbox’s stagnant stock is a result of low investor zeal. The company’s main business of cloud hosting and collaboration is a commoditized space with many competitors including deep-pocketed ones like Google and Microsoft that are able to offer competing services at a much lower cost.

• From 2018 to 2020, Dropbox’s annual sales grew from $1.4bn to $1.9bn, quite significant growth but not on the standards of many hot software stocks. Even though it’s a stable and profitable business, that doesn’t draw much attention in a hot bull market flushed with investors looking to make quick bucks.

• It seems like Elliott will push for a Dropbox sale to institutional investors or bigger rivals like Microsoft, Google et al. That Slack sold for $28bn to Salesforce has likely given the activist hedge fund hopes of Dropbox getting acquired for a significant sum that’ll give it good profits.

• If we remember, Apple tried to buy Dropbox when it was still a startup in its early stages. Maybe it’ll come knocking on Dropbox’s door again.

Photo: Elliott Management Co-CEO Paul Singer, credit: World Economic Forum, licensed under CC BY-NC-SA 2.0

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