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Business Models


ThinkStock

Initial public offering (IPO)

Rackspace Readies IPO After Going Private in 2016

  • Written by Edward Gately
  • July 10, 2020
To date, COVID-19's impact on Rackspace's business has been limited.

A Rackspace IPO means the company could return to public trading less than four years after going private. Apollo Global Management acquired Rackspace in November 2016.

IPO

There remain steps to take before Rackspace goes public.

On Friday, the company filed a statement with the Securities and Exchange Commission proposing an initial public offering  of its common stock. A public Rackspace would trade on the Nasdaq under the ticker symbol “RXT.”

The number of shares and the price range for the proposed offering have yet to be determined.

Rackspace is in a quiet period and wouldn’t comment.

In the Rackspace IPO filing, the company said the COVID-19 pandemic has accelerated cloud transformation efforts for new and existing customers. And it has underscored the importance of multicloud strategies, it said.

“Over the last several months, customers have increasingly turned to multicloud solutions to pivot to new business models and save costs,” it said.

Impact of Pandemic

In response to the pandemic, Rackspace implemented a number of initiatives to ensure the safety of its employees. Since March 9, all but a handful of its employees have been working from home. Additionally, it has had minimal disruption to its go-to-market efforts and service delivery organizations, it said.

“We believe our business benefits from a strong financial profile that positions us well in the current environment,” it said. “Our exposure to customers remains broad and diverse, with over 120,000 customers across 120 countries as of March 31.”

The impact of COVID-19 on Rackspace‘s operational and financial performance will depend on certain developments, the company said. Those include the duration and spread of the outbreak, and its impact on customers, vendors and employees.

It could also impact Rackspace’s sales cycles and industry events, it said.

Uncertainty Moving Forward

“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 accounts receivable, which could have an adverse effect on our results of operations and cash flows,” Rackspace said. “At this point, we are focused on the health and safety of our employees, customers and partners.”

To date, the impact on Rackspace’s business has been limited. That’s because most of its services either are or can be delivered remotely. And it has a diverse customer base.

“In addition, our mitigation efforts, including offering our customers contract extensions in exchange for better payment terms and obtaining improved payment terms from our vendors, have generally been successful since the start of the pandemic,” it said. “The full extent to which COVID-19 may impact our financial condition or results of operations over the medium to long term, however, remains uncertain. Due to our recurring revenue business model, the effect of COVID-19 may not be fully reflected in our results of operations until future periods, if at all.”

Keep up with resources for supporting partners and customers during the COVID-19 crisis.

Rackspace said it will continue to actively monitor the situation. And it may take further actions that alter its business operations. That depends on federal, state or local authorities, or what’s in the best interests of employees, customers, partners, suppliers and stockholders.

Tags: Cloud Service Providers MSPs Business Models Cloud Sales & Marketing Strategy

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