Rackspace IPO Priced at $12 to $16

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The upcoming initial public offering for Rackspace, which would break a lengthy drought for venture-backed tech IPOs, could raise up to $276 million. Rackspace expects its shares to be priced at $12 to $16, according to an SEC filing Friday, in which the company said it will sell 15 million shares to the public. The Rackspace IPO is expected to occur the week of August 4-8.

An additional 2.25 million shares have been allocated for overallotment sales, raising the potential IPO to 17.25 million shares. That total would fetch $207 million at the $12 low end of the pricing range, and $276 million at the $16 top end. Rackspace will trade under the symbol RAX on the New York Stock Exchange.

Rackspace, a managed hosting and IT infrastructure specialist based in San Antonio, said on April 25 that it would go public through a “dutch auction” process similar to that used by Google in its 2004 IPO. The company, which has raised $39.6 million, filed to go public in March 2000 but withdrew its plans a year later after the collapse of the dot-com bubble.


In its latest SEC filing, Rackspace reported net revenues of $130.8 million, up 55.7 percent from $84 million in the same period in 2007. Net income for the second quarter fell from $4.8 million in 2007 to $4.2 million for the quarter ended June 30, 2008, largely due to higher expenses for personnel. On a quarter-by-quarter basis, revenues continued their upward climb from the $119 million reported in the first quarter of 2008. Rackspace now has 33,607 customers.

Rackspace intends to use part of the proceeds from its upcoming IPO to expand its data center network. The company expects to spend at least $160 million between construction of its new headquarters and expanding its data center space. An additional $75 million is earmarked for IT equipment.

The company recently announced plans to lease data center space in Hong Kong to expand into the Asia Pacific managed hosting market.

About the Author

Rich Miller is the founder and editor-in-chief of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.