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Technology & Entrepreneurship

Rackspace Files To Go Public Again, Deal 'Keeps' Company In San Antonio, Says Co-Founder

RS_Bldg_Ext_10_0.jpg
Courtesy Rackspace
Rackspace's Windcrest Headquarters

This story is breaking and will be updated

Rackspace Technology filed documentation with the U.S. Securities and Exchange Commission to go public again Friday. This move ends speculation and rumor about the possibility that cropped up periodically over the years and intensified in the last six months.  

Goldman Sachs, Citigroup and JP Morgan are the leading underwriters of the deal, another eleven are listed. Details of stock price and number of shares are to be determined. 

Some see the company going public as anchoring the company to San Antonio.

"This is a great outcome for the city," said Dirk Elmendorf, a Rackspace co-founder, via text message. "If Rackspace was acquired, the first thing they would do is uproot the HQ. This keeps Rackspace in San Antonio."

The number of initial public offerings in 2020 has been lower than this time last year, with several ballooning in the amount raised. One likely caught Rackspace Technology’s eye.

Chinese cloud company Kingsoft Cloud raised a half a billion dollars two months ago in its IPO.

Rackspace changed its name a month ago to Rackspace Technology, and made several large corporate acquisitions as well as reducing unprofitable areas of the company in the nearly four years it’s been private.

The company founded in San Antonio went private when it was purchased by Apollo Global Management in the latter part of 2016.

Apollo, which still owns the company, bought it for $4.3 billion following several punishing years for the company as the web hosting industry transformed around it with technology giants entering the market like Amazon, Google and Microsoft. 

Going private allowed the company to reduce more than 7% of its 6,200-person workforce in 2016. The company followed up with subsequent rounds of layoffs each February. 2020 didn’t see the annual culling. Rackspace has also seen three new CEOs since going private. But according to its filing with the SEC, the company has grown to 6,800 employees. 

Kevin Jones is CEO of Rackspace Technology
Credit Rackspace Technology
Kevin Jones is CEO of Rackspace Technology

Since then Rackspace has made four large acquisitions in three years. The pricetags of the purchases were undisclosed until now. In 2017 it bought Datapipe and TriCore for a combined $1.4 billion in cash, assets, and financing. It followed that by purchasing RelationEdge, a Salesforce consulting and digital agency for $65 million. Finally it purchased Onica last year for $316 million.

According to CEO Kevin Jones, these acquisitions made it necessary to change the name.

“We're a completely transformed company right compared to where we were even just three years ago,” said Jones in an interview with TPR last month. 

Jones said they wanted to make sure people knew about more than their managed hosting services.

Company revenues have grown since 2016, from around $2 billion the year prior to it going private to $2.4 billion, according to documents filed with the SEC.

|Related: An Interview With Rackspace CEO Kevin Jones|

According to the company they had three record-breaking quarters recently and in no small part because of so many companies trying to go all-online or all-remote because of COVID-19.

“We are thriving right now because customers are in such urgent need of becoming more efficient, saving money, of pivoting into these new business models,” said Jones last month. 

The company’s SEC filing paints a more tempered view of the pandemic.

“If the pandemic or the resulting economic downturn continues to worsen, we could experience service disruption, loss of customers or higher levels of doubtful trade,” it said

The company will be listed on the NASDAQ Global Select Market under “RXT.”

Jones declined to comment last month on the possibility of an initial public offering but it was clear he thought the company was ready. 

“We're seeing a lot of growth, a lot of acceleration in our business. And really the sky's the limit for our company.”

Paul Flahive can be reached at paul@tpr.org on on Twitter @paulflahive.

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