Is Rackspace finally ready to announce an initial public offering? That’s the speculation over at TechCrunch, where Erick Schonfeld notes that “there are no filings yet with the SEC, but press releases touting its revenues have mysteriously been stripped from the company’s site.” In the comments, Mike Arrington adds that the removal of financial releases from the web site is a “huge sign that they’re prepared to file an IPO.”
Rackspace is often the focus of IPO speculation because it filed to go public in March 2000, only to see the dot-com bubble burst a few months later. Rackspace withdrew its IPO plans in March 2001.
A closer look shows that there actually is a recent SEC filing, but it doesn’t tell us much. On March 17, Rackspace filed a REGDEX form, which is used by companies for stock sales that are exempt from SEC registration requirements under Regulation D, which typically covers private stock sales to a limited number of investors. Rackspace’s REGDEX form was submitted via a paper filing, so no electronic text is available (this is apparently not unusual for REGDEX forms). A full explanation of Regulation D exemptions is available from the SEC web site.
Does the REGDEX filing mean an IPO is imminent? My experience with these filings is limited to some quick research this morning. But one possibility is that Rackspace is using private stock sales among existing investors to consolidate or refine its equity structure ahead of an IPO. It could also be a stock sale in lieu of an IPO, perhaps to a private equity firm. There has been plenty of interest lately in the hosting sector by private equity firms including ABRY Partners and GI Partners, which have each purchased Texas hosting companies.
Or … it could be nothing. Reports of an impending Rackspace IPO have popped up periodically since the hosting market began its recovery, often from industry executives curious about how the market would value the managed hosting standardbearer. The recent rebranding had the feel of a company on an IPO trajectory (same goes for Parallels, by the way). Rackspace has been patient in a period of strong activity in the industry. The company has always acknowledged that an IPO is a future option, but has always emphasized the need to build the business.
Here’s a recap of some of our recent reporting on Rackspace: