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Cloud service company Rackspace technology (NASDAQ: RXT) was a hot topic on Monday after a media report said 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 was nothing less than Amazon (NASDAQ: AMZN).
Owning a piece of Rackspace would theoretically benefit Amazon Web Services (AWS), the lucrative cloud computing business operated by the retailer. The main activity of Rackspace is the rental of server space for customers wishing to manage data in the cloud; this activity makes it a frequent business partner of AWS, although it also partners with AlphabetGoogle and Microsoft.
Image source: Getty Images.
Rackspace is currently majority owned by an alternative investment specialist Global management of Apollo (NYSE: APO). Apollo acquired Rackspace in 2016 and deprived it soon after. Rackspace returned to the stock market in a slightly different form of business earlier this month after an IPO, but its stock has not been popular. The shares have historically traded several dollars below their IPO price of $ 21.
It is not known whether Amazon is speaking with Apollo for the Rackspace stake, or with another shareholder or shareholders. The Reuters article also did not provide a possible size or price for the stake under negotiation.
Sources interviewed said there is no guarantee that a deal will be made with Amazon. They added that if an agreement was reached, negotiations on its specifics could last a month or two.
The aforementioned parties have not yet commented on the article. Unsurprisingly, Rackspace shares zoomed higher in trading on Monday, rising more than 10% on the day.
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