Rackspace Prices IPO

NEW YORK, Aug 07 (Reuters) – Rackspace Hosting Inc (RAX.N: Quote, Profile, Research, Stock Buzz) launched its initial public offering on Thursday within the estimated price range, becoming the first information technology company to test the public markets in six months, and the first venture-backed IPO since the first quarter.

The San Antonio-based web hosting company raised $187.5 million with the sale of 15 million shares in its second attempt to launch an IPO.

Rackspace had filed for an IPO in 2000, only to withdraw it when the market cooled to tech-related IPOs that year.

“It was a very favorable pricing based upon strong demand,” said Scott Sweet, a senior managing partner with the advisory firm IPO Boutique. “They priced it to work.”

Rackspace, backed by the California-based venture capital firms Norwest Venture Partners and California-based Sequoia Capital, offers hosting services to support websites, web-based IT systems and computing.

The last information technology IPO to launch was ArcSight Inc (ARST.O: Quote, Profile, Research, Stock Buzz), a provider of security and compliance management software, in February. Its shares fell 2 percent in first day trading, according to Thomson Reuters data.

So far in 2008, 12 tech IPOs have been pulled.

The IPO priced at $12.50 per share, compared with a forecast range of $12 to $16. The company used the so-called Dutch auction method, which Google Inc (GOOG.O: Quote, Profile, Research, Stock Buzz) also used for its $1.9 billion IPO in 2004, to determine the offering's price.

The Dutch auction method calls for the underwriter to solicit bids from potential investors, whether institutional or individual, who indicate how many shares they want at what price.

Rackspace shares are expected to begin trading on the New York Stock Exchange under the symbol “RAX” on Friday.

The underwriters, led by Goldman Sachs & Co (GS.N: Quote, Profile, Research, Stock Buzz), Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz), and Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) have the option to purchase an additional 1.9 million shares from the company, and 345,000 from existing stockholders.

Rackspace plans to use the proceeds of the IPO to finance its growth plans, which may include paying off debts or acquisitions, according to a regulatory filing.

(Reporting by Phil Wahba, Editing by Jacqueline Wong)