Labaton Sucharow Files Securities Class Action Lawsuit Against Rackspace Hosting, Inc. 

NEW YORK (May 11, 2017) – Labaton Sucharow LLP announced that the Firm filed a securities class action lawsuit on behalf of City of Warwick Municipal Employees Pension Fund (Warwick) against cloud computing company and data hosting provider, Rackspace Hosting, Inc., and certain of its senior executives (collectively, the defendants). The action, City of Warwick Municipal Employees Pension Fund v. Rackspace Hosting, Inc., No. 17-cv-03501 (S.D.N.Y.), asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act), and U.S. Securities and Exchange Commission (SEC) Rule 10b-5 promulgated thereunder, on behalf of all investors who purchased or otherwise acquired Rackspace common stock between November 11, 2014 and August 10, 2015 (the class period).

The complaint alleges that during the class period, the defendants violated provisions of the Exchange Act by issuing false and misleading statements regarding the impending loss of its contract with Vodafone Group Plc (Vodafone) and the attendant impact on the company’s profitability and growth prospects. In August 2010, Rackspace announced that its Vodafone contract had been renewed for an additional five years.

During the class period, Rackspace repeatedly touted the profitability and growth of its international business. However, the defendants’ statements pertaining to the company’s profitability and growth prospects were materially false and misleading because they failed to disclose that: (1) Vodafone had initiated extensive data migration away from Rackspace servers, signaling Vodafone’s intent to replace Rackspace with different 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, the 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 associated 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.   

If you purchased or acquired the publicly traded common stock of Rackspace during the class period, you are a member of the class and may be able to seek appointment as the lead plaintiff.  Lead plaintiff motion papers must be filed with the U.S. District Court for the Southern District of New York no later than July 10, 2017. The lead plaintiff is a court-appointed representative for absent members of the class. You do not need to seek appointment as the 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.

If you would like to consider serving as the lead plaintiff or have any questions about this lawsuit, you may contact Francis P. McConville, Esq. of Labaton Sucharow, at (800) 321-0476, or via email at fmcconville@labaton.com. You can view a copy of the complaint here