Dropbox is staring at a downround IPO

Dropbox will probably not initially be loved on public markets as much as it was by venture capitalists.

That’s after the storage company disclosed Monday that it would sell new shares at between $16 and $18 a share, meaning Dropbox would be valued at around $7 billion at the high end of the range. That’s well behind the $10 billion that it was valued at during its last round of private financing in 2014.

The company could always perform unusually well when trading opens — a 40 percent to 60 percent “pop” on opening day would lift the company back up to its prior valuation — but that’s a big gamble. Instead, the company’s shareholders will most likely see the value of their shares fall when Dropbox, under ticker symbol DBX, begins trading on the Nasdaq.

The performance of Dropbox — along with Spotify, which is also expected to trade publicly in the early spring — will be watched closely by venture capitalists as the two marquee IPOs of the first half of the year. There’s a chance that some companies shy away from going public if they see companies like Dropbox are valued more highly when they stay private than when they go public.

Dropbox’s $10 billion valuation has served as something of an albatross for the company, causing it for years to fend off questions about whether it was overvalued. The company has acknowledged that valuations were very “different” in 2014 than they are today, and it’ll still be a substantial exit for its venture capital backers, primarily Sequoia and Accel.

The company said it would raise as much as $648 million in the offering, according to the filing. Salesforce Ventures will also buy $100 million in shares in a private placement.

This article originally appeared on Recode.net.