Why Rackspace Hosting, Inc. Jumped Sky-High Today

By Anders BylundMarketsFool.com

Image source: The OpenStack Foundation.

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What: Trading of Rackspace Hosting (NYSE: RAX) shares was halted just before the close of Thursday's trading -- but the stock had already jumped 12.7% higher on suddenly massive volume. When the trade halt lifted, Rackspace continued to surge higher in after-hours trading. As of this writing, the extended trading gain stands at 18%, making for a total boost of more than 30% in a matter of minutes.

So what: According to headlines streaming across the Dow Jones newswire just before the closing bell, Rackspace is in "advanced talks" to go private under the wings of unnamed private equity firms.

Now what: Rackspace could use an adrenaline injection right now, and a private equity exit strategy might make sense. As a Rackspace shareholder, I'm keenly aware that the company's cash flows have been lacking lately.

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Rackspace is a pioneer in the cloud-computing arena, having led the OpenStack cloud platform through its early days. But that leadership never translated into huge cloud-service sales, and maybe it's time to try on a different strategy.

That being said, the report relied on unnamed sources, and "advanced talks" do not always lead to a firm John Hancock. Treat this sale process as a rumor until Rackspace either confirms or denies it. The company is slated to report earnings on Monday night, for example, which would be a great stage for announcing or debunking today's report.

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Anders Bylund owns shares of Rackspace Hosting. The Motley Fool recommends Rackspace Hosting. Try any of our Foolish newsletter services free for 30 days.

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