Rackspace Technology, Inc.'s (NASDAQ:RXT) market cap surged US$41m last week, private equity firms who have a lot riding on the company were rewarded

Key Insights

• Significant control over Rackspace Technology by private equity firms implies that the general public has more power to influence management and governance-related decisions
• Apollo Global Management, Inc. owns 53% of the company
• Institutional ownership in Rackspace Technology is 20%

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To get a sense of who is truly in control of Rackspace Technology, Inc. (NASDAQ:RXT), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 53% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms were the biggest beneficiaries of last week’s 17% gain.

Let's delve deeper into each type of owner of Rackspace Technology, beginning with the chart below.

Check out our latest analysis for Rackspace Technology

What Does The Institutional Ownership Tell Us About Rackspace Technology?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Rackspace Technology already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Rackspace Technology's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Rackspace Technology. Apollo Global Management, Inc. is currently the largest shareholder, with 53% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Meanwhile, the second and third largest shareholders, hold 4.0% and 2.6%, of the shares outstanding, respectively.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Rackspace Technology

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in Rackspace Technology, Inc.. As individuals, the insiders collectively own US$9.0m worth of the US$261m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 23% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 53%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Rackspace Technology better, we need to consider many other factors. Take risks for example - Rackspace Technology has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.