The skies darkened for cloud storage provider Dropbox (DBX) today on reports that an activist investor wants to curb the power of Chief Executive Drew Houston.
Blue Moon for CEO
According to a report in the Wall Street Journal, hedge fund Half Moon Capital has issued a shareholder proposal seeking to remove Dropbox’s dual-class share structure, which gives CEO and co-founder Houston a voting supermajority.
It is understood that Half Moon Capital is concerned by the company’s slowing revenue growth and does not like its strategy on payment tiers.
Half Moon also believes that the current corporate structure has prevented shareholders from holding management accountable after it made “significant missteps.” According to the Journal, Half Moon Capital holds around 40,000 Dropbox shares, a stake recently valued at about $1.1 million.
Paying User Numbers Down
The WSJ report said the proposal would require a majority vote for approval at the company’s annual meeting, meaning Houston would have to give the green light for it to pass. He presently has a 77% voting stake because of his Class B shares, which have 10 times the voting rights of Class A shares.
Last month, Dropbox warned when announcing its fourth-quarter results that the number of paying users for its cloud-hosted service would decline this year. It projected a reduction of approximately 300,000 users in 2025. The fourth quarter saw a sequential decline in paying users of 15,000 from the previous quarter. The company also flagged “elevated churn” and pressure in its teams business.
In addition, it cut 20% of its workforce in October after a 16% reduction in April 2023 to slash costs. Its share price is down nearly 10% since the start of the year, although it is up nearly 12% over the last 12 months.
Is DBX a Good Stock to Buy?
On TipRanks, DBX has a Hold consensus based on 1 Buy, 5 Hold and 1 Sell rating. Its highest price target is $34. DBX stock’s consensus price target is $31.25 implying an 15.19% upside.
