[back]

Rackspace Hosting, Inc.

Period: Oct 11, 2014 to Aug 10, 2015

Lead Plaintiff Deadline: Jul 10, 2017

Summary of Case:

A securities class action has been filed against Rackspace Hosting, Inc. (RAX) on behalf of all investors who purchased or otherwise acquired Rackspace common stock between November 11, 2014 through August 10, 2015.  This case has been filed in the USDC - New York (Southern).

The Complaint alleges as follows: On August 9, 2010, the Company's then-CEO, Lanham Napier, highlighted that Rackspace had renewed the so-called M-PESA contract with Vodafone Group Plc ("Vodafone") for an additional five years (the "Vodafone Contract"). After this renewal, the Vodafone Contract was due to expire in five years, or on April 1, 2015.

By the start of the Class Period, unbeknownst to investors, Rackspace and Vodafone were in discussions concerning the non-renewal of the Vodafone Contract. In fact, Vodafone had engaged in extensive data-migration away from Rackspace servers well in advance of the April 1, 2015 expiration date, signaling Vodafone's intent to replace the Rackspace contract with alternative providers.

While investors could have speculated that the Vodafone Contract would terminate on the April 1, 2015 expiration date, Defendants intentionally concealed the impending loss of the Vodafone Contract, and the attendant impact on the Company's growth prospects. Indeed, Defendants never disclosed the financial impact of the Vodafone Contract non-renewal on Rackspace's reported financial results and future growth. As detailed herein, the Vodafone Contract was highly material to Rackspace's business Vodafone was one of Rackspace's "largest and longest-tenured customers, " and a significant contributor to Rackspace's International segment, which represented 32 percent of the Company's 2015 revenues.

Finally, on August 10, 2015, the true impact of the Vodafone Contract non-renewal was finally revealed when Rackspace lowered its 2015 revenue guidance to "just below $1.99 billion" due to "marketing and sales issues and product challenges. " Although the Company did not attribute this guidance reduction to the Vodafone Contract non-renewal specifically, the loss of Q3 and Q4 2015 Vodafone Contract recurring revenues that were originally assumed during these quarters caused the Company to lower its 2015 revenue guidance.

On this news, Rackspace stock dropped $2.49 per share, or 7.85 percent, to close at $29.24 per share on August 11, 2015.

If you purchased this company's shares during the Class Period and suffered a loss or for further information about the case, please review the links below.

Join This Action

[back]