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Rackspace gears up for return to public markets

Cloud provider plots IPO just four years after it went private

Cloud services provider Rackspace has revealed it plans to return to public markets just four years after a deal was struck to take the company private and twelve years since its last initial public offering (IPO). 

In an announcement, the firm said it has filed a registration statement with the Securities and Exchange Commission, and well as applied for listing its common stock on the Nasdaq Global Select Market under the ticker symbol 'RXT'.

Rackspace said the number of shares to be offered has not been determined and didn’t reveal how much it intends to raise through the public offering, listing only the $100 million placeholder figure. 

Back in April, however, people familiar with the matter told Reuters that equity firm Apollo Global Management was gearing up to take Rackspace public with an IPO that could value the cloud services firm at more than $10 billion, inclusive of debt.

Rackspace went private back in 2016 in a deal totalling $4.3 billion (£3.4 billion), having first gone public back in 2008. According to Reuters, the cloud services firm had been exploring an IPO for the last two years – but its "weak organic growth" and debts from its 2016 buyout and subsequent acquisitions prevented the move. 

However, the sources also told the news outlet that the increase in remote working due to COVID-19 has "breathed new life" into Rackspace, as businesses look to adapt and prepare for any possible future disruptions. 

The cloud services firm, which originally began life as a customer service-orientated hosting company, reported revenue of $2.4 billion for 2019, with a net loss totalling $102.3 million.

For the first quarter of this year, the company said it made an operating profit of $21.5 million from $652 million in revenues – but $72 million of interest expenses brought that down to a $48.2 million net loss.   

At the end of the quarter, Rackspace;s outstanding debt was $3.98 billion – approximately $3 million of which was the result of its 2016 acquisition – but the firm said it plans to use money raised from its stock offering to drive down the figure.

Goldman Sachs, Citigroup Global Markets and J.P. Morgan Securities are serving as joint lead book-running managers and as representatives of the underwriters for the proposed offering, Rackspace said. 

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