Rackspace Hosting Securities Class Action Initiated

WASHINGTON, DC (May 12, 2017) — U.S. Market Advisors Law Group PLLC announces that a class action lawsuit has been filed against Rackspace Hosting, Inc. (“Rackspace” or the “Company”) (NYSE:RAX) and certain of its senior executives.  The class action is on behalf of investors who purchased or otherwise acquired Rackspace common stock, seeking to recover compensable damages caused by defendants’ violations of the Securities Exchange Act of 1934. The case has been filed in United States District Court for the Southern District of New York and docketed under 17-cv-03501. 

If you are a shareholder who purchased Rackspace securities between November 11, 2014 and August 10, 2015 (“Class Period”), you have until July 10, 2017 to ask the Court to appoint you as Lead Plaintiff for the class.  The Lead Plaintiff is a representative for absent members of the class.  Investors do not need to seek appointment as Lead Plaintiff to share in any class recovery in this action.  If you are a class member and there is a recovery for the class, you can share in that recovery as an absent class member.  You may retain counsel of your choice to represent you in this action. To discuss this action, contact David P. Abel at [email protected].

Allegations Against Rackspace
Rackspace, together with its subsidiaries, is a cloud computing company that provides data hosting and other related services to business customers around the world. The Company’s cloud computing services offer public, private, and hybrid cloud hosting, that include dedicated servers, databases, storage, and networking.

Rackspace has two reportable segments: the Americas and International. The International segment accounted for 32 percent of Rackspace’s 2015 revenue. Vodafone Group Plc (“Vodafone”), a U.K.-based multinational telecommunications provider, was a significant customer within the Company’s International segment.

The initial complaint alleges that during the Class Period, Defendants violated provisions of the Exchange Act by issuing false and misleading statements regarding the impending loss of its contract with Vodafone Group Plc and the attendant impact on the Company’s profitability and growth prospects.

During the Class Period, Rackspace repeatedly promoted the profitability and growth of its international business.  Defendants’ statements pertaining to the Company’s prospects, however, were materially false and misleading. Defendants failed to disclose that: (1) Vodafone had initiated extensive data migration away from Rackspace servers, signaling Vodafone’s intent to replace Rackspace with alternative providers on the contract’s April 1, 2015 expiration date; (2) the failure to secure a renewal of the Vodafone Contract would have a significant near-term financial impact on the Company’s 2015 recurring revenues; and (3) as a result of the foregoing, Defendants lacked a reasonable basis for their positive statements about the Company and its growth prospects.

Beginning in May 2015, a series of disclosures exposed the non-renewal of the Vodafone Contract and its concomitant impact on the Company’s financial performance and business prospects.  In reaction to these revelations, Rackspace stock lost hundreds of millions of dollars in market capitalization, with the Company’s stock price falling from a Class Period high of nearly $56 per share on April 27, 2015, to close at $29.24 per share on August 11, 2015.  

About USMA
U.S. Market Advisors Law Group PLLC is a national law firm based in Washington, D.C. The firm represents investors worldwide in U.S. securities class action lawsuits.
Contact
David P. Abel
(202) 274-0237
[email protected]