Tech firm Rackspace files for IPO again
Rackspace Technology, the San Antonio tech firm, is heading back to the stock market.
The cloud service company on Friday filed for an initial public offering with the Securities and Exchange Commission.
Rackspace is looking to list its common stock on the Nasdaq Global Select Market under the symbol “RXT.” Its registration statement, however, didn’t include the number of shares the company intends to sell off.
Founded in San Antonio in 1998, the company has been in private hands for four years.
Apollo Global Management Inc., a New York-based private equity firm, acquired Rackspace in 2016 in a deal valued at $4.3 billion. Apollo paid $32 a share in taking the company private. Rackspace shares previously traded on the New York Stock Exchange.
As a private company, Rackspace has posted a string of annual losses.
In its initial public offering filing, it reported losses of $59.9 million in 2017, $470.6 million in 2018 and $102.3 million last year — on revenue of $2.1 billion, $2.45 billion and $2.44 billion, respectively.
“Over the past eight years, we have invested over $1 billion and 12 million hours to develop a robust and proprietary suite of over 200 technology tools, branded solutions and accelerators for our customers,” company officials said in the filing.
One analyst said the firm’s annual losses aren’t a major cause for concern. But the company will need to show improved results soon after its IPO, said Philbert Shih, managing director of Structure Research, a Toronto consulting firm that analyzes the internet infrastructure market.
“When it comes to infrastructure companies that have cycles, you have to invest heavily to support and expand growth. There’s a lot of operational expenses (and) capital expenditure involved, so they’ve gone through that,” Shih said. “If you describe them going private as kind of a retrenching and investment phase, well, that phase is over, and now they’re going to have to perform.”
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Rackspace, with a workforce of about 6,800, started out as a company that hosted websites. But as bigger players such as Amazon, Google and Microsoft have taken over that market, Rackspace in recent years has shifted to cloud management. Cloud computing lets businesses access and store their data online.
The company went public in 2008 with an IPO that raised $187.5 million. Rackspace shares opened at $12.50 a share, and climbed to about $80 in 2013. But by mid-2016, its stock had fallen about 60 percent from its peak.
In its filing Friday, the firm said it hadn’t been “significantly impacted” by the COVID-19 pandemic — most of its employees have been working from home, and the company’s services are delivered remotely. But a prolonged pandemic could “have an adverse effect on our results of operations and cash flows,” officials said.
“If the pandemic or the resulting economic downturn continues to worsen, we could experience service disruption, loss of customers or higher levels of doubtful trade accounts receivable,” they said.
Shih said the pandemic and ensuing shift to remote working have been a boon for Rackspace’s business, with employers increasingly relying on the cloud.
“There’s certain infrastructure that’s very critical and continues to run amid the pandemic, and, in fact, people are moving more stuff online and that benefits Rackspace,” Shih said.
From March through May, just nine companies filed for IPOs in the United States compared to 46 over the same three months in 2019, according to data provider IPO Boutique.
IPO activity, however, is beginning to rebound. Twenty-four companies went public last month, up from 20 IPOs in June 2019