Cloud

Dropbox's nuclear weapon: A line of credit of half a billion dollars

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If Dropbox needs to spend a lot of money, it can do so now.

The file-sharing company has secured a line of credit just north of $500 million, a source familiar with the matter tells VentureBeat. This is more cash than the amount the Financial Times reported over the weekend.

The move could help Dropbox stave off pressure from its competitors such as Box, which just filed to go public. Also, the money could be an escape hatch should the company go through its cash too fast.

VentureBeat’s source could not confirm the exact amount or which banks were behind the new debt financing. The Financial Times previously reported JPMorgan was leading the deal.

Dropbox disclosed $325 million in funding for a $450 million round.

One could think of the credit line as nuclear weapons for a doomsday scenario in case the company can’t go public by the fourth quarter of this year, Sam Hamadeh, chief executive of private-company research firm PrivCo, wrote in an email to VentureBeat.

The idea is to never have to tap the credit line, but to have it there should Dropbox need it. Its availability could give the impression that Dropbox isn’t desperate for money.

Hamadeh expects Dropbox to start the process for an initial public offering this summer and hit public markets in the fourth quarter of this year despite the Financial Times’ assertion that Dropbox probably wouldn’t go public this year.

“Dropbox’s cash burn means they have little choice but to try to IPO as soon as practical,” Hamadeh wrote, estimating that the company is using up more than $25 million every month.