A Rackspace shirt is worn at the opening of the Open Cloud Academy. Photo by Scott Ball.
Rackspace has acquired Onica, a cloud consulting and managed services company based in California. Credit: Scott Ball / Rivard Report

The Dow Jones newswire and the Wall Street Journal reported Thursday that San Antonio-based Rackspace Hosting is in advanced talks with one or more private equity firms regarding a potential sale. Rackspace stock began to surge at 3:50 p.m. ET and closed at +18% after trading company shares on the New York Stock Exchange was temporarily suspended.

The Journal reported that a deal could be reached as soon as this week, according to unnamed sources it said are familiar with the matter.

Before the potential sale was leaked Thursday afternoon, the company held a market value of $3 billion, which means that “with a typical takeover premium, the company could be valued at as much as $4 billion,” according to the Journal.

Rackspace CEO Taylor Rhodes sent out a mass email to employees acknowledging rumors of a potential sale.

“We have been the subject of speculation in the past, and just as in those cases, we do not comment on them or entertain this speculation,” Rhodes stated. “Please realize that Rackspace, just like any other company, will not comment on this to the press, investors, customers or any others.”

The company has faced speculation in recent months after mixed stock performance in the first quarter.

The Journal reported that in 2014, Rackspace “said it had hired bankers to help evaluate expressions of interest.” Blue Harbour Group LP disclosed a sizable stake in Rackspace later that year, which now sits at more than 9%.

In October 2015, Seattle-based online retailer and cloud computing giant Amazon, one of Rackspace’s competitors, signed up to receive the company’s famed Fanatical Support. While both offer cloud computing, Rackspace has focused on offering premium services like support.

The second-quarter earnings report, due Monday, will follow closely on the heels of the rumors.

Rackspace, founded in the late ’90s and publicly traded since 2008, serves as the cornerstone to San Antonio’s growing tech sector. The Castle, its highly publicized headquarters in the former Windsor Park Mall located in Windcrest off of IH-35, is home to approximately 4,000 employees. The company employs more than 6,000 employees worldwide.

https://rivardreport.wildapricot.org

Top image: A man wears a Rackspace shirt at the opening of the Open Cloud Academy.  Photo by Scott Ball. 

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Sarah Talaat

Sarah Talaat

Former Rivard Report intern Sarah Talaat graduated from The University of Texas at Austin in May 2016. You can find her in Beijing, China where she is pursuing a business journalism master's at Tsinghua...