Rackspace: Sequoia Apparently Distributes Stake

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Rackspace (RAX) investor Sequoia Capital yesterday apparently distributed its roughly 10% stake in the web-hosting company to its limited partners, a move which pushed down the share price and triggered a spike in volume.

In a research note, JMP Securities analyst Patrick Walravens writes that his due dilligence suggests that “one of the company’s largest venture investors distributed all of its position in Rackspace,” and that the investor in question held about a 10% stake. While Walravens does not ID the investor in his note, his description pretty clearly describes the position in the stock held by Sequoia.

Walravens writes that he never likes to see this kind of selling, but that the position was in a 9-year-old fund, and that the seller did not have a board seat. (Again, he never specifically mentions Sequoia by name.) Sequoia first invested in the company in 2000.

RAX, which yesterday slid 75 cents, or 4.2%, to $17.25 on 4,265,900 shares - 4x the usual turnover in the stock - today is off another 10 cents, or 0.6%, to $17.15.