Cloudy outlook as Rackspace shares plunge on first day of trading
Rackspace shares dropped 22% to $16.39 at the close of trading, after the company raised $704 million in an initial public offering priced at the bottom of the marketed range.
(Source: Wolfgang Hasselmann on Unsplash)
The shares began trading yesterday on the Nasdaq Global Select Market under the ticker symbol "RXT." The Financial Times described it as a disappointing IPO that contrasted with the rising fortunes of publicly traded cloud businesses.
The US-based company, which leases server space, and helps corporations store and access data in the cloud, set a price of $21 per share for 33.5 million shares.
It had aimed to price the shares at up to $24 each. The total raised amount could increase to $809 million if the underwriters exercise a "greenshoe" option to purchase a further 5 million shares.
The company said it intends to use a portion of the net proceeds to pay off $600 million in debt.
Private lives
Rackspace confirmed in July it was planning to go public again, just four years after reversing its previous IPO – and 12 years after that previous initial public listing.
In 2016, the company went private in a $4.3 billion deal, with investors led by funds affiliated with Apollo Global Management.
The aim was to gain the freedom to pursue a longer-term strategy without having to answer to shareholders keen for immediate results. It first went public in 2008.
According to the FT, Apollo will hold about 65.1% of Rackspace's voting power following the listing. New investors reportedly include the mutual fund managers BlackRock and Fidelity.
The FT suggested that the company has a total enterprise value of $7.6 billion, including debt of almost $4 billion.
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- Rackspace plans IPO after going private in 2016
- Rackspace finalizes deal to go private
- Rackspace names third CEO in two years
- Rackspace taps Kevin Jones as new CEO
- Rackspace climbs the cloud stack
— Anne Morris, contributing editor, special to Light Reading
