(Reuters) - Shares of Rackspace Technology Inc (O:RXT) plunged more than 20% on their Nasdaq debut on Wednesday, a blow for the cloud services firm's private equity owners Apollo Global Management (N:APO).
The stock was trading at $16.59 at 1:16 p.m. ET (1716 GMT) on Wednesday, down from the $21 per share price Rackspace shares had sold for in its initial public offering on Tuesday.
The lackluster IPO and trading debut bucked the recent trend of strong appetite from investors for cloud computing companies as the novel coronavirus pandemic drives more businesses to operate digitally and rely on cloud computing for more of their workflow.
Rackspace sold 33.5 million shares in its IPO at the bottom end of its target range of $21 to $24 per share, valuing the company at $4.18 billion, excluding debt.
"We've actually been very pleased with how the IPO process has gone. This is one of the largest tech IPOs of the year so we’re pretty excited to reach this milestone," Rackspace Chief Executive Kevin Jones said in an interview before the stock started trading.
"We're not really focused on today's stock price. We're more focused on the long term and the future," Jones added.
Cloud companies such as Ncino Inc (O:NCNO) and Kingsoft Cloud Holdings Ltd (O:KC) have seen their share prices more than double since going public earlier this year.
Rackspace has historically leased server space and helps corporations store and access data in the cloud, and in recent years, has expanded its business to include multicloud services.
Rackspace had been exploring an IPO for the last two years, but its weak organic growth and large debt due to its $4.3 billion leveraged buyout by Apollo in 2016 and subsequent acquisitions had stopped it from pursuing an IPO earlier.
Goldman Sachs (NYSE:GS), Citigroup (NYSE:C) and J.P. Morgan were the lead underwriters for the IPO.