NEW YORK (Reuters) - Private equity firm Apollo Global Management Inc has registered Rackspace Holding Inc for an initial public offering (IPO) that could value the cloud services firm at more than $10 billion, including debt, people familiar with the matter said.
Apollo has been emboldened by the rally in the shares of Rackspace peers such as Fastly Inc and Datadog Inc in recent weeks, the sources said, as the novel coronavirus outbreak drives more businesses to operate digitally and rely on cloud computing for more of their workflow.
Rackspace has confidentially filed for an IPO with the U.S. Securities and Exchange Commission and is planning to proceed with a stock market debut as soon as the volatility that has been fueled by the pandemic subsides, the sources said.
The sources cautioned that a date for Rackspace’s IPO had not yet been set and asked not to be identified because the preparations are confidential. Apollo declined to comment, while Rackspace did not immediately respond to a request for comment.
U.S. listings have come to a near-standstill in the last two months due to coronavirus outbreak-induced stock market swings, which have made it harder to price shares in an IPO and have dampened the valuation that many companies can attain.
There were only two IPOs in the United States in March, compared with seven a year ago, according data provider IPO Boutique. So far in April, there have also only been two new listings. Some 14 companies went public in April 2019.
Rackspace leases server space and helps corporations store and access data in the cloud. The San Antonio-based company had been exploring an IPO for the last two years, but its weak organic growth and large debt pile, accumulated as a result of its $4.3 leveraged buyout by Apollo in 2016 and subsequent acquisitions, had stopped it from pursuing it.
The push by companies to have employees work remotely and make more of their operations “pandemic-proof” has breathed new life into Rackspace’s business and brought an IPO within reach, according to the sources.
The global cloud services market generated $264.8 billion in revenue last year and was estimated to exceed $900 billion by 2027, according to Allied Market Research.
Reporting by Joshua Franklin and Greg Roumeliotis in New York; editing by Jonathan Oatis