Shares of cloud-service provider Rackspace Technology fell 20% in trading after its initial public offering, opening at $16.85 on Wednesday.
The company sold 33.5 million shares at $21 on Tuesday, pricing at the bottom of its range.
The deal marks the worst opening performance on a U.S. exchange this year for an IPO raising $100 million or more, according to data compiled by Bloomberg.
Rackspace was taken private by Apollo Global Management in 2016 in a deal valued at $4.3 billion, including a considerable amount of debt.
Chief Executive Officer Kevin Jones said the company’s total debt is currently about $3.9 billion. Rackspace is planning to use some of the $700 million it raised from the IPO to pay off the debt.
“Today’s day one,” Jones said in an interview.
Rackspace held its first IPO in August 2008 when it raised $187.5 million in a modified Dutch auction. Shares closed down that first session as well.
Apollo still holds 65.1% of voting shares after this IPO, according to securities filings. Other investors include BlackRock, Fidelity, and Norges Bank Investment Management.
Rackspace estimated that its revenue will be between $655 million and $657 million in the second quarter. It said it expected to record a net loss between $24 million and $44 million. The company reported a net loss of $102.3 million in 2019, on revenue of $2.44 billion. It lost $470.6 million on $2.45 billion in revenue in 2018.
“We’re in the middle of a tectonic shift to multicloud technology,” Jones said. “It is the right place, right time for our transformation. We used to compete with hyper-scalers in cloud like Amazon, Google, and Microsoft. Now, we partner with them.”
Goldman Sachs Group, Citigroup, and JPMorgan Chase led the offering. Rather than holding a typical roadshow, the IPO was marketed virtually via video conference.