Rackspace Down 7% On Rumor It Can't Find Buyer

Rackspace Hosting (NYSE: RAX) shares plunged on a report that IBM (NYSE: IBM) will pass on the chance to acquire the company.

Rackspace hired an investment banker to explore strategic options in May, and speculation has been high that IBM would cough up the price.

But dealreporter.com reported Friday that IBM has backed away and Rackspace has seen little interest from other strategic buyers.

Some observers speculated that the latest rumor was planted by short sellers.

As of June 13, 10.29 million shares of the 142.07 million share float were sold short.

Dealreporter cited unnamed sources for its report.

A UBS analyst said in May that there were few potential buyers. Along with IBM, AT&T and CenturyLink have been mentioned in speculation.

Rackspace, which provides cloud-based services, posted earnings for the recent quarter of $0.18 per share, up from $0.14 a year earlier. Revenue grew 3.2 percent to $421.05 million, from $408.1 million in the year-earlier period.

Rackspace traded recently at $33.53, down 7.5 percent.