Rackspace IPO Recap and Analysis

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The Rackspace IPO Friday was a long time coming. The offering was closely watched as a sign of the health of the IPO market and perhaps an indicator of whether Wall Street might be receptive to offerings by other venture-backed companies in the hosting sector. Shares of RAX ended their first day at $10.01, down 20 percent from the IPO price of $12.50 per share. Here’s a roundup of reaction from around the web:

  • Tech Company Goes Public, But Its Shares Dive 20% (New York Times): “There has been far too much importance placed on this I.P.O. as the pied piper for the tech sector and for the health of the I.P.O. market,” said David Menlow, president of IPOfinancial.com. “Rackspace is not the I.P.O. market savior.”
  • Rackspace’s IPO Latest to Struggle (Wall Street Journal): “In the end, we decided we were going to walk against the wind,” CEO Lanham Napier told the Journal. “We survived the tech wreck, we survived the tech bubble bursting, and we’re an even stronger company now than we were back then.”
  • Rackspace Hosting IPO shows a weak story: MarketWatch concludes that the web hosting sector is not much of a draw for new investors. “The poor performance of Rackspace Hosting Inc. on its debut of trading Friday may be seen as a disappointment for the moribund IPO market, but the company clearly had a tough story to sell.”
  • Rackspace IPO Starts Out Reeling (TheStreet.com): “Analysts had expected a relatively warm response to the new issue, but Rackspace faces tough competition in its attempt to produce long-term growth.”

  • Rackspace IPO tanks (CNN/Money): “Rackspace took the IPO plunge Friday and fell flat on its face, which will only make other startups more hesitant to follow its lead.”
  • Rackspace’s IPO meltdown (Blogging Stocks): “On its opening day, the stock price plunged 20% to $10. Ironically enough, Wall Street was hoping that the Rackspace deal would help spark the IPO market. … After all, Rackspace is a great company.”
  • Consider the source and its historic animosity towards the data center industry, but here’s the take from Valleywag: “Rackspace’s IPO was a crashing disappointment. … A more deserving tech company, one hopes, will come to the public markets soon, and erase the memory of Rackspace’s broken offering.”
  • Should Dell Buy Rackspace: “There has been a growing buzz in the cloud computing community that Rackspace with their large corporate hosting customer base may make for an ideal acquisition by a hardware vendor looking to adjust for the coming shift toward internet centric computing, aka cloud computing.” See this follow-up as well.

About the Author

Rich Miller is the founder and editor at large 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.