Rackspace IPO prices at bottom of target range to raise about $703 million

(Reuters) – Cloud services firm Rackspace Technology Inc RXT.O sold shares in its initial public offering (IPO) on Tuesday at $21 per share, the bottom end of its target range, to raise $703.5 million, the company said.

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.

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 KC.O have seen their share prices more than double since going public earlier this year.

Rackspace has historically leased server space and helps corporations store and access data in the cloud and in recent years has expanded its business to include multicloud services.

In 2019, Rackspace reported revenue of $2.44 billion and a net loss of $102.3 million.

The company had been exploring an IPO for the last two years, but its weak organic growth and large debt, accumulated due to its $4.3 billion 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 for the IPO.

Reporting by Joshua Franklin in Boston and Greg Roumeliotis in New York; Editing by Jonathan Oatis, Aurora Ellis and Himani Sarkar

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