According to anonymous sources behind the Rackspace news, Amazon wants to invest in the cloud service company. The sources claim that the talks are still in the early stages and may not result in a deal.
The anonymous sources in this Rackspace news claim that Amazon is only seeking a minority stake in the company. Rackspace’s current majority owner is private-equity firm Apollo Global Management. It was acquired by Apollo in 2016 for $4.3 billion.
So why exactly would Amazon want to invest in Rackspace? The cloud company offers services to companies that help them switch their businesses to the cloud. That includes transferring them over to Amazon Web Services, as well as other cloud companies, reports Reuters.
The reports behind this news note that a potential investment from Amazon would strengthen its relationship with Rackspace. This could result in more businesses making the switch over to Amazon’s cloud offerings.
With the talks still being in early phases, it’s unlikely that RXT investors will hear anything else about the deal for a couple of months. Either way, the news has definitely drawn attention to the stock and make it one worth keeping an eye on in the near future.
An investment from Amazon could be just what Rackspace needs to boost its stock higher. The company launched its IPO earlier this month and hasn’t seen the gains it was likely hoping for.
RXT stock was up 12.2% as of Monday afternoon.
As of this writing, William White did not hold a position in any of the aforementioned securities.