Rackspace IPO bags $704m, proceeds used to pay down debts to private equity backer

'Not the most glorious of returns to public market' says analyst

Twelve years after first going public, Rackspace Technology has returned to the NASDAQ with more of a whimper than a bang. It has raised $704m, the vast majority of which will be used to pay down debts owed to its private equity backer.

The multi-cloud slinger priced the US IPO at $21 per share – the lower end of the marketed $21-$24 range, listing 33.5 million shares. Rackspace also granted underwriters a 30-day option to slurp up to an additional 5.025 million shares of common stock for the same price.

"Rackspace Technology intends to use a portion of the net proceeds from the offering to redeem, retire or repurchase $600 million aggregate principal amount of its outstanding 8.625 per cent Senior Notes due 2024 and to pay related premiums, fees and expenses," the company reiterated.

The remaining sum will be used for "general corporate purposes", it added.

Backed by Apollo Global Management, Rackspace is valued in the listing at $4.2bn, lower than the $4.3bn that its parent paid to take the company private when it bought shares at $32 a piece.

"This is not the most glorious of returns to the public market for Rackspace," said Philip Carse, chief analyst at Megabuyte. He said that despite the "buy and build" activity as a privately owned business – it bought Datapipe for $1.39bn – Rackspace was making similar earnings prior to Apollo's purchase.

The planned IPO was first mooted in July and the timing – in the middle of a pandemic – was interesting, perhaps spurred on by the massive demand for cloud services coming from businesses whose workforce have been locked down for parts of this year.

Charles King, founder of analyst Punt-IT, told us last month that the current work-from-home dynamics may continue for the next few quarters, but "it's hard to see it supporting a long-term growth strategy". He also pointed out that competition is furious between cloud providers.

Rackspace designs and runs cloud platforms, recently signing a deal to make AWS its preferred cloud provider. The company has 120,000 customers situated across 120 countries, and in Q1 reported a loss of $48.2m, lower than the $57.5m posted a year earlier. Sales came in at $652.7m, up from $606.9m. ®

Similar topics

Other stories you might like

  • Millions of people's info stolen from MGM Resorts dumped on Telegram for free
    Meanwhile, Twitter coughs up $150m after using account security contact details for advertising

    Miscreants have dumped on Telegram more than 142 million customer records stolen from MGM Resorts, exposing names, postal and email addresses, phone numbers, and dates of birth for any would-be identity thief.

    The vpnMentor research team stumbled upon the files, which totaled 8.7 GB of data, on the messaging platform earlier this week, and noted that they "assume at least 30 million people had some of their data leaked." MGM Resorts, a hotel and casino chain, did not respond to The Register's request for comment.

    The researchers reckon this information is linked to the theft of millions of guest records, which included the details of Twitter's Jack Dorsey and pop star Justin Bieber, from MGM Resorts in 2019 that was subsequently distributed via underground forums.

    Continue reading
  • DuckDuckGo tries to explain why its browsers won't block some Microsoft web trackers
    Meanwhile, Tails 5.0 users told to stop what they're doing over Firefox flaw

    DuckDuckGo promises privacy to users of its Android, iOS browsers, and macOS browsers – yet it allows certain data to flow from third-party websites to Microsoft-owned services.

    Security researcher Zach Edwards recently conducted an audit of DuckDuckGo's mobile browsers and found that, contrary to expectations, they do not block Meta's Workplace domain, for example, from sending information to Microsoft's Bing and LinkedIn domains.

    Specifically, DuckDuckGo's software didn't stop Microsoft's trackers on the Workplace page from blabbing information about the user to Bing and LinkedIn for tailored advertising purposes. Other trackers, such as Google's, are blocked.

    Continue reading
  • Despite 'key' partnership with AWS, Meta taps up Microsoft Azure for AI work
    Someone got Zuck'd

    Meta’s AI business unit set up shop in Microsoft Azure this week and announced a strategic partnership it says will advance PyTorch development on the public cloud.

    The deal [PDF] will see Mark Zuckerberg’s umbrella company deploy machine-learning workloads on thousands of Nvidia GPUs running in Azure. While a win for Microsoft, the partnership calls in to question just how strong Meta’s commitment to Amazon Web Services (AWS) really is.

    Back in those long-gone days of December, Meta named AWS as its “key long-term strategic cloud provider." As part of that, Meta promised that if it bought any companies that used AWS, it would continue to support their use of Amazon's cloud, rather than force them off into its own private datacenters. The pact also included a vow to expand Meta’s consumption of Amazon’s cloud-based compute, storage, database, and security services.

    Continue reading

Biting the hand that feeds IT © 1998–2022