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Rackspace IPO prices at bottom of target range: source

Cloud services firm Rackspace Technology Inc RXT.O on Tuesday priced its initial public offering (IPO) at $21 per share, the bottom end of its target range, to raise $703.5 million, according to two people familiar with the matter. The IPO valued San Antonio, Texas-based Rackspace, which is owned by private equity firm Apollo Global Management (APO.N), at $4.18 billion, excluding debt. The company had aimed to sell 33.5 million shares at a target price range of $21-$24 per share. A representative for Rackspace declined to comment. The IPO bucks the recent trend of strong appetite from investors for cloud computing companies as the novel coronavirus outbreak drives more businesses to operate digitally and rely on cloud computing for more of their workflow. Other cloud companies such as Ncino Inc NCNO.O and Kingsoft Cloud Holdings Ltd have seen their share prices more than double since going public earlier this year. Rackspace leases server space and helps corporations store and access data in the cloud. The company had been exploring an IPO for the last two years, but its weak organic growth and large debt pile, accumulated as a result of its $4.3 leveraged buyout by Apollo in 2016 and subsequent acquisitions, had stopped it from pursuing it. Shares in Rackspace, which was publicly listed before being bought by Apollo, are due to begin trading on the Nasdaq on Wednesday under the symbol “RXT.” Goldman Sachs & Co, Citigroup Global Markets and J.P. Morgan Securities LLC are among the underwriters on the IPO. (Corrects valuation in second paragraph to $4.18 billion instead of $3.48 billion)

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