I'd be much more scared if they were NOT ploughing money back into the business in order to grow. IPOs are fundraising events first and foremost. Virtually all companies that IPO are operating at a loss (ie, nearly synonymous with "growth company"). The sooner HNers recognize this, the sooner they will get involved with multi-billion companies.
Growth companies come at a discount (execution risk, growth is not given, growth industries = plenty of competitors), I doubt Box's valuation will support its financials and road ahead. One comment on "virtually all companies that IPO are operating at a loss", unfortunately this is the opposite case, companies that IPO tend to be profitable.
To be fair, most companies going public lately have been unprofitable. Yes, not true historically; but the desire for savings yield/strategy funds that will buy no matter what/success of flipping ipos has lowered the bar. And the P/S metrics .. well, Box would be stupid _not_ to ipo right now. I expect they'll play the same trick as others and sell a small percentage of the fully diluted share count to create a sellers market for the shares, and target a 50-100 multiple on revenue. When the market gets used to their price they can file a secondary.
edit: I should clarify again based on sibling/nephew comments... I think it's too far off topic to go into this in depth, but clearly running at a loss is expected and appropriate for companies at a certain stage of their growth profile. Even big companies (like Amazon, like someone noted) can do this if they prefer to invest in pursuing large enough growth opportunities out of cash flow vs selling debt or shares. Regardless, the revenue growth has to show up at some point, and spending in sales has to show ROI.
of course, i'm 100% with you. if i were box i'd be wanting to ipo on a hot market to avoid dilution/raise as much cash as possible. this is a good move for box. all i'm saying is that this isn't (imho) a good investment for ipo investors.
A company can be spending more than they make, and still be profitable (a la Amazon) - hence the "plowing money back into the business" comment above. A company in its growth stage believes there is significant profits to be made by spending on customer acquisition, and generally is making an informed decision not to pad the coffers and horde money (a la Apple).
Discretionary spending is different than fixed costs and contractual liabilities. I am saying that you should think of costumer acquisition as an upfront expense that leads to future profits - if the business is growing, and has reasonable margins.
For example, Amazon has 'razor thin' margins and is operating at a slight loss. Does anyone really argue that they are not 'Profitable'?
Loss per share was $14.68 in 2013 and grew slightly to $14.89 in 2014. It's ok to lose money at IPO, but those losses need to be narrowing. Otherwise, you're plowing money back into a hole.
