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Rumor: Rackspace Hosting Gets No Traction With Suitors

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Rackspace Hosting (NYSE: RAX) shares dropped on a rumor that it's getting little reaction from potential buyers.

But an analyst who asked not to be named called the report "sketchy" and wondered whether short sellers were at work planting unfounded information.

Short interest accounted for 13.1 million of Rackspace's 142 million shares outstanding as of June 30. That's up from about 10 million short shares two weeks earlier.

Still, the Brightwire story noted that Wells Fargo analyst Gray Powell a week ago predicted a 70 percent chance that a deal would fall through.

A rumored $43 per share bid from Hewlett-Packard appeared to grow less likely when re/code said it obtained denials from Hewlett-Packard.

Rackspace hired Morgan Stanley in May to help it explore strategic options.

"It's been a weird process," said the analyst who asked to remain anonymous, but still believes deals with either Hewlett or CenturyLink may materialize.

"It makes sense to me. I've heard $40 a share," the analyst said. "It's cheap at that level."

Rackspace closed Friday at $31.85, down 5.4 percent.

Posted-In: News Rumors M&A


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