Elliott Management has amassed a more than 10% stake in Dropbox, making the activist hedge fund the largest institutional shareholder in the cloud storage group.
The New York-based hedge fund is in talks with Dropbox and has informed the company that its stake is greater than 9.9% of Vanguard, said a person familiar with the matter.
Elliott declined to comment on how he intends to use his large stake to influence the company’s management.
Dropbox took center stage earlier this decade, as its cloud storage service solved a problem for consumers and workers who wanted to access their music or files from multiple devices. It quickly faced a competitive challenge, as all major cloud computing companies came to see storage as a key part of their expanding services.
Attempts to counter this by adding new apps built on top of their cloud storage and user and revenue growth have slowed dramatically, with Wall Street expecting revenue to increase by about 10% this year.
This has left Dropbox on the sidelines as software and cloud services companies grew during the pandemic, leading to a doubling of the Bessemer cloud index (of which Dropbox is a part) since early last year.
However, Dropbox shares have been trading primarily below the price of their initial public offering in 2018.
Dropbox uses a dual-class structure that gives founders 10 votes per share and usually acts as a deterrent for activist investors. But Elliott has not shied away from companies with powerful founders.
Last year, the $ 42 billion hedge fund built a $ 2.5 billion stake in SoftBank, which wanted to domesticate Masayoshi Son’s large technology conglomerate, despite owning a 25% stake.
Activist investors, who are acquiring stakes in companies and agitating for change, have once again come out of a quiet 2020 when many feared a public backlash if they were targeting companies fighting the pandemic.
Cloud service companies that have failed to capitalize on the work-from-home trend generated by the coronavirus pandemic have become an obvious target for activists.
Starboard Value is pushing for changes to rival Dropbox Box, where it owns an 8% stake and has called for the addition of new executives to the board.
The Wall Street Journal first reported on Elliott’s involvement in Dropbox.