Multi-Cloud MSP Rackspace Seeks to Lift Sagging Stock

Rackspace, within an SEC filing, disclosed a $75 million stock buyback plan. Read between the lines, and the multi-cloud MSP is seeking to lift its share price ($RXT) and boost investor confidence in the business.

Rackspace is an important bellwether stock for midmarket MSPs that are seeking private equity funding or M&A partners. Indeed, Rackspace ranks among the world’s Top 250 Public Cloud MSPs, according to ChannelE2E research.

Rackspace’s revenue was $777 million in Q4 of 2021, up 9% compared to Q4 of 2020. Also, multi-cloud services represent 81% of Rackspace’s revenue, CFO Amar Maletira told Wall Street analysts in February 2022.

Rackspace: Growth Concerns, Business Evolution

However, Rackspace investors ($RXT) appear concerned about potential slowing grow at the company.

The 2022 growth concerns surfaced after Rackspace laid off 10 percent of its staff and offshored some support responsibilities in mid-2021.

Instead of competing against public cloud providers, Rackspace in recent years shifted to multi-cloud partnerships with Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform. Moreover, Rackspace has expanded its co-managed, multi-cloud security services.

The Rackspace business transformation has involved multiple tuck-in acquisitions and investments — such as Microsoft Azure partner Just Analytics, and managed Kubernetes provider Platform 9. Additional buyouts have included RelationEdgeDatapipeTriCore Solutions, and Onica.

Rackspace Business Valuation: 2016, 2018 and 2022 Data Points

The Rackspace business evolution has also involved multiple ownership models.

In 20216, Apollo Global Management acquired Rackspace for $4.3 billion and took the company private. By 2018, Rackspace owners and investors were seeking a $10 billion valuation for the multi-cloud MSP.  However, a Rackspace IPO in August 2020 disappointed investors.

Fast forward to March 2022, and Rackspace’s market capitalization is roughly $2.2 billion, according to SeekingAlpha.

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