Rackspace tanks on return to stock exchange

Cloud services provider’s shares fall by more than 20 per cent after opening bell

Rackspace has disappointed on its first day of trading, with its share price falling by more than a fifth after the opening bell on Wednesday.

The cloud service provider saw its share value fall by 22 per cent in its first day of trading to a low of $15.89 a-share, after launching with an IPO price of $21 a-share.

The Texas-based technology firm raised $703.5m in gross proceeds from the IPO, which it plans to funnel into paying back debts owed to former owner Apollo Global Management

According to Bloomberg data, Rackspace's debut marks the worst showing on a US exchange this year for an IPO raising $100m or more.

Wednesday's listing is the second time Rackspace has gone public in the history of the company. The first time, during the financial crisis of 2008, also proved a disappointment, with its shares falling by 20 per cent from its IPO price after the opening bell.

Rackspace was taken private by Apollo Global Management in 2016 for $4.3bn. Over the last four years, the company has reinvented itself as a multi-cloud services provider. The firm used to compete with AWS and Microsoft Azure in selling its own public cloud services, but now partners with the industry's leading cloud providers as part of its new strategy.

Rackspace's last quarter for the three months ending 31 March shows a 7.5 per cent sales increase to $652.7m. its operating income grew by one per cent to $21.5m over the same period.

The firm employs 6,800 staff across 120 countries.

The US firm's disappointing IPO stands in contrast with successful stock market listings by other cloud-focused companies so far this year.

Software as-a-service provider ZoomInfo IPOed at the start of June, with its stock price soaring by 62 per cent in its first day of trading to $34 a-share.

Another cloud company, Chinese Kingsoft Cloud, saw its shares rise by 40 per cent on its first day of trading on NASDAQ on 8 May.