Cloud storage company Dropbox is feeling the pressure from activist investor Half Moon Capital. This small hedge fund is pushing to end founder control within the company.
According to the Wall Street Journal, the reason for this is the stagnating revenue growth and dissatisfaction with the platform’s pricing strategy.
Half Moon Capital is targeting Dropbox’s current share structure, which gives CEO and co-founder Drew Houston a voting majority via a so-called dual-class structure. This means that his Class B shares have ten times as many voting rights as regular Class A shares. With approximately 77% of the voting rights, Houston holds a firm grip on the reins despite a relatively limited economic interest.
According to Half Moon, this structure ensures shareholders cannot hold management responsible for strategic errors. The hedge fund is asking for this inequality to be abolished in a proposal that will be voted on during the annual shareholders’ meeting. However, given Houston’s voting majority, the proposal will have little chance without his support.
Shareholder exerts pressure
Half Moon Capital owns approximately 40,000 Dropbox shares, with a value of approximately 1.1 million dollars. Although this seems like a small position, the fund mainly uses its vote as a means of applying pressure. It hopes the proposal will encourage the board and management to make broader changes within the company.
Dropbox has been facing headwinds in recent years. The number of paying users increased by less than 1% at the end of 2024 compared to the previous year. And a decline is even expected in 2025. This is the first time this has happened since the IPO. In addition, Dropbox lost market share to competitors and, according to critics, the company had unrealistic expectations of its own AI initiatives.
Global layoff
To cut costs, Dropbox announced in October 2024 that it would be making a further 20% of its global workforce redundant, having already laid off 16% of its staff earlier in 2023. In an open letter in early 2024, Half Moon also called on the company to reinvest in the previously discontinued cheaper family plan.
Dropbox and Half Moon Capital have not yet publicly responded to the developments. Meanwhile, Dropbox’s share price remains around $27, with an estimated market value of approximately $8 billion. The upcoming shareholders’ meeting could be a turning point for the company’s future.