Rackspace's IPO Is Severely Underwhelming

Rackspace Technology Inc. (NASDAQ: RXT) entered the market with a whimper in its initial public offering. Shares opened at $16.85, after pricing at $21 the day before. The company originally wanted to price its 33.5 million shares in the range of $21 to $24, with an overallotment option for an additional 5.025 million. At the $21 price, the entire offering was valued up to roughly $809 million.

The underwriters for the offering are Goldman Sachs, Citigroup, JPMorgan, RBC Capital Markets, Evercore ISI, Barclays, BMO Capital Markets, Credit Suisse, Deutsche Bank Securities, HSBC, LionTree, Siebert Williams Shank, Drexel Hamilton and Apollo Global Securities.

Recently, businesses have moved to the cloud, not only to drive cost, scale and reliability benefits, but also to create new revenue opportunities. At the same time, businesses are increasingly turning to the use of more than one cloud solution at a time to enhance performance.

These trends have accelerated recently as businesses create and adapt to new economic and labor models and are increasingly looking for technologies that enable digital transformation and enhance productivity. Ultimately, Rackspace handles all of this.

Rackspace is an end-to-end multicloud technology services company. The firm designs, builds and operates its customers’ cloud environments across all major technology platforms, irrespective of technology stack or deployment model. Rackspace partners with its customers at every stage of the cloud, enabling them to modernize applications, build new products and adopt innovative technologies.

The company expects to use the net proceeds from this offering to pay down its debt, as well as for general corporate purposes.

Rackspace stock was last seen down about 18% at $17.23, in a range of $16.10 to $17.39 on the day thus far. Also over 12 million shares had moved as of 12:30 p.m. Eastern.