Cloud services company Rackspace Technology (NASDAQ: RXT) was a hot ticket Monday to a media report that a high-profile peer is in talks to buy a minority stake in the company. The Reuters report, which is based on information from “people familiar with the discussion”, said the interested party is no less than Amazon (NASDAQ: AMZN).
Owning a piece of Rackspace would theoretically be beneficial for Amazon Web Services (AWS), the lucrative cloud computing company operated by the retailer. Rackspace’s core business is leasing server space for clients who want to manage cloud data; this activity makes it a frequent business partner of AWS, although it also partners with it AlphabetGoogle’s and Microsoft.
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Rackspace is currently majority owned by alternative investment specialist Apollo Global Management (NYSE: APO). Apollo acquired Rackspace in 2016 and took it private shortly thereafter. Rackspace returned to the stock market earlier this month in a somewhat different corporate form following an IPO, but its share has not been popular. The shares have consistently traded several dollars below their IPO price of $ 21.
It is unclear whether Amazon is talking to Apollo for the Rackspace stake, or to a shareholder other than shareholders. The Reuters article also did not provide any possible size or price for the company under negotiation.
The interviewed sources said that there is no guarantee that a deal will be reached with Amazon. She added that once an agreement is reached, negotiations on its specifications could take one or two months.
The aforementioned parties have yet to comment on the article. Not surprisingly, shares of Rackspace zoomed higher in trading Monday, with the day up more than 10%.
