Rackspace tries to stem stock woes with $75M buyback
San Antonio-based Rackspace Technologies will buy back $75 million in common stock, in a move to shore up its waning stock price.
The cloud-services provider filed documents with the U.S. Securities and Exchange Commission that its Board of Directors authorized the move Thursday.
The company reentered the public market in 2020 after years of private equity ownership, hoping to take advantage of swelling investment and need for remote work solutions in the midst of a global pandemic.
It saw stock prices rise from its initial public offering of $21 to highs in April 2021 of more than $26 a share. The stock price shot up after rumors and unconfirmed news reports circulated at that time of global giant Amazon Web Services purchasing a stake in the company.
AWS — as the largest cloud computing company in the world — is one of the company's largest partners and has been seen as a key to their survival.
The company pivoted to managed-cloud services years ago, pivoting to helping companies use behemoths like AWS, Google and Microsoft Azure.
Since its high the company's value has plummeted to less than half that starting Thursday at about $10.60 a share. This means it has a market cap of $2.3 billion, almost half of the $4.2 billion of its IPO value.
The company announced in February it had beat analysts’ predictions for that quarter and that revenue was up nearly 9%. Despite the moderately good news, stock prices fell. Zacks Investment Research lowered its rating from a “buy” rating to a “hold.”
It is currently unclear how the company will finance the buyback as it has ended the past two years with net losses of $245 million in 2020 and $218 million in 2021, and the company continues to have “substantial” debt service payments on billions in loans, according to its public filings.
Last year, the company made other balance-book cleaning moves including selling its training program “Open Cloud Academy” and laying off about 10% of its workforce — or about 700 people. The layoffs were the largest in company history and many of the roles were outsourced to international call centers.