Rackspace Technology wants to change course again. In order to do so, it needs to be privatized. Rackspace isn’t strong enough to delist itself, and is therefore looking for a buyer.
Rackspace went public less than two years ago, which has now become a hurdle to making necessary changes. The company wants to delist primarilybecause its current market capitalization does not represent the true value of the company.
Rackspace helps companies design, deploy and maintain public and private cloud environments. It offers managed services on Amazon Web Services, Microsoft Azure and the Google Cloud Platform. It also offers private cloud solutions.
Currently, Rackspace’s revenue models for public and private cloud are very different. The market is increasingly demanding multicloud models. Rackspace will therefore have to make the necessary changes, which is difficult when being evaluated by shareholders every quarter.
The strategy behind public and private cloud environments also varies greatly, as does the investment required. Rackspace CEO Kevin Jones says the growth opportunities in the public cloud are many times greater than in the private cloud. The private cloud is more about optimizing business and margins. In the public cloud, the right investments can achieve big growth.
Rackspace has done an in-depth strategic review of its own organization, partly due to interest from a third-party looking to acquire part of its business. The review revealed that the value of the business does not match the value that the company sees internally. For this reason, it decided to sell and privatize the company again.
In November 2016, the company was sold and privatized to make the necessary changes as well. That ended up taking four years. In August 2020, the company held an IPO and went public again. Now, less than two years later, the company wants to go the opposite way once again.
Rackspace is growing, but not fast enough
Looking at analysts’ reactions to Rackspace’s figures, they’re positive about the organization’s profitability, but not about its growth. The public cloud is growing at a tremendous rate, but Rackspace isn’t taking full advantage of that growth. As a result, Rackspace isn’t performing as expected by stock market analysts. By privatizing, the company is freed from all analysis and can better position itself in the market.