As reported here at The WHIR and around the Internet, Rackspace has filed the preliminary paperwork with the United States Securities and Exchange Commission to issue an Initial Public Offer of stock (IPO). The complete S-1 documents can be found
here and make pretty interesting reading for anyone who has a business involving web servers or large scale hosting.
Assuming that the IPO is issued, and that Rackspace becomes a New York Stock Exchange traded stock - this is great news for the web hosting industry. Here are the main reasons why:
An IPO at this time indicates that this sector is growing like crazy despite the specter of a U.S. recession - While there has been a pull back in a number of high visibility stock market sectors (think: housing markets, mortgages, banking, consumer durables) there is actually an acceleration in web hosting going on. This is driven by the growing acceptance of the web as the place for any and all data and applications. We are witnessing the transference of data from the desktop to the 'cloud'. Rackspace is riding the crest of this wave and pointing the way for the entire hosting industry.
Rackspace is an almost pure play web hosting company - Anyone, either within the web hosting industry or outside, can now have much greater visibility into the specific metrics that make web hosting a great business. Many investors are reluctant to invest in a sector or industry which is complex or laden with technical jargon. Rackspace will educate the market on many of the terms and realities that accompany web hosting operations. This will benefit other web hosting companies seeking investment in the future.
A successful IPO will create demand among investors for similar companies - Once Rackspace reveals the money to be made in web hosting, the larger investment community will seek out web hosting investments. This will mean more money available for web hosting companies in every niche of hosting. In essence, the business model will be vetted and the mechanisms for profit better understood.
The publicity surrounding the IPO will generate buzz for 'web hosting' - Just by submitting the S-1 documents, Rackspace has already created a substantial buzz around the investment and Internet communities related to web hosting. As of this morning, there are over 111 references to Rackspace on Google news. Over 35 of those posted in the past few hours, and all related to the IPO. Web hosting buzz and publicity enriches all those in this industry.
I wish everyone over a Rackspace the very best of luck with this exciting new venture, and on behalf of the entire web hosting industry I offer a heart-felt, ''Thank You''.
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But it should be noted that if you want to invest in a Web site hosting company there are already a few companies that are publicly traded and one of them is very good and very under valued, specially compared to valuation that RackSpace is to get. I am referring to Peer1 hosting. They are traded on the TSX under symbol of PIX at a ridiculously low valuation of about $100Mill. Given that RackSpace is looking to be valued at $3Bill, then you can easily look at the value of stock of Peer1 to go up by 10 times in the very short time frame.
And I tell you that Peer1 is a great hosting company compared to RackSpace from actual experience. We used to have many dedicated servers on Rackspace, we now host them all on Peer1 and are very satisfied.