Elliott Management has amassed a more than 10 per cent stake in Dropbox, making the activist hedge fund the largest institutional shareholder in the cloud storage group.

The New York-based hedge fund is in talks with Dropbox and has informed the company that its stake is larger than Vanguard’s 9.9 per cent holding, said a person familiar with the matter.

Elliott declined to comment on how it intends to use its large shareholding to influence the direction of the company.

Dropbox shot to prominence earlier this decade as its cloud storage service solved a problem for consumers and workers who wanted to access their music or files from multiple devices. It quickly faced a competitive challenge, as all the big cloud computing companies came to see storage as a core part of their expanding services.

Attempts to counter that by adding new applications built on top of its cloud storage floundered and user and revenue growth has slowed sharply, with Wall Street expecting revenue to rise about 10 per cent this year.

That has left Dropbox on the sidelines as cloud software and services companies boomed during the pandemic, leading to a doubling in the Bessemer cloud index — of which Dropbox is a part — since the start of last year.

Shares in Dropbox, however, have mostly traded below the price of its initial public offering in 2018.

Dropbox employs a dual-class structure that gives founders 10 votes per share and typically acts as a deterrent to activist investors. But Elliott has not shied away from companies with powerful founders.

The $42bn hedge fund last year built a $2.5bn stake in SoftBank, seeking to tame Masayoshi Son’s sprawling technology conglomerate, despite his owning a 25 per cent stake.

Activist investors, which acquire stakes in companies and agitate for change, have re-emerged from a quiet 2020 when many feared a public backlash if they targeted companies struggling from the pandemic.

Cloud service companies that have failed to capitalise on the work-from-home trend spawned by the coronavirus pandemic have become an obvious target for activists.

Starboard Value is pushing for changes at Dropbox rival Box, where it owns an 8 per cent stake and has called for new directors to join the board.

Elliott’s stake in Dropbox was first reported by the Wall Street Journal.