Managed hosting company, Rackspace, launched its public stock offering last week to mixed results. Despite the fact that the market has struggle of late, and that only three technology companies have gone public in 2008, Rackspace proceeded with its IPO and the stock first traded on August 11, 2008.
The ticker symbol is ‘RAX’ and the stock trades on the New York Stock Exchange. The stock price and company market valuation can be seen via Google Finance at: http://finance.google.com/finance?q=RAX&hl=en. Rackspace competes with managed dedicated server companies HostMySite.com, The Planet, and Fastservers.net among others.
The stock was issued using a ‘Dutch Auction’ technique that was also used to price the Google IPO. While the stock was initially priced at $12.50 for launch – it quickly dropped 20% on the first day of trading to close at $10.70. As of the end of the first week of trading the stock was priced at $10.69. While this may be a disappointment for some, it still values the overall Rackspace enterprise at $1.23 billion. That’s billion with a ‘B’.
Rackspace is profitable, however, at the current pace of earnings the stock trades at over 60 times earnings (P/E ratio of 60.06). Compare that with Google (P/E of 33.53), Microsoft (P/E of 14.87) or Yahoo (P/E/ of 28.42) and the stock still seems richly priced by comparison.
Regardless of this first week of trading, the entire web hosting community will be closely watching to see how Rackspace fairs in the marketplace over the next few quarters. That is because investor sentiment regarding Rackspace will most likely spill over into the broader hosting market. So it would seem that what’s good for Rackspace is good for hosting – at least in the near term.
