NEW YORK (CNNfn) - Shares of VA Linux Systems Inc., which makes computer products based on the Linux operating system, got a warm reception when they made their debut on Wall Street Thursday - warm enough to break a new IPO record.|
The company raised $132 million, pricing 4.4 million shares at $30 a share on the Nasdaq. Credit Suisse First Boston was the lead underwriter, with Deutsche Banc Alex. Brown, Hambrecht & Quist and Lehman Brothers serving as co-managers. Trading opened at 299.
After climbing as high as 320 shortly after they began trading at around noon, shares of VA Linux (LNUX) ended the day more than 690 percent higher at 239-1/4, making it the most successful debut ever in U.S. markets.
The previous record was held by theglobe.com (TGLO), which gained 605.55 percent in its first day of trade in November 1998.
VA Linux made its dazzling debut amid a broader downturn among tech stocks.
As VA Linux shares headed up, the Nasdaq composite index headed the opposite direction, slipping as much as 48.01 lower to 3538.07 at roughly the same time VA Linux reached its peak.
Analysts attributed the offering’s success to the market in which VA Linux does business.
The company, which has its headquarters in Sunnyvale, Calif., provides computer products and services that are based on the Linux operating system. Linux is an "open-source” operating system, which means that it is in the public domain and open to modifications by independent developers.
While Linux, which was introduced in 1990 by Finnish computer science student Linus Torvalds, historically has had a cult following, it recently has gained wider acceptance in the computing mainstream, especially among Internet service providers that use it as the operating system for hosting Web servers.
Many industry observers see Linux as an emerging rival to Microsoft’s ubiquitous Windows operating system, especially in the server market, where Microsoft’s NT platform is widely used.
"It is being accepted, it is being sponsored, and it represents the first real threat,” said David Menlow, an IPO analyst at IPOfinancial.com in Millburn, N.J.
Menlow, who had expected VA Linux shares to open in the "high 200s,” pointed to the success of Red Hat (RHAT), which distributes its own version of the Linux operating system, as an example of the enthusiasm investors are showing for things Linux-related these days.
Shares of Red Hat, which made their Nasdaq debut on Aug. 11, initially were priced at 14. In afternoon trade Thursday, they were at 282-1/8.
"It’s a fertile area for further development, and it's got plenty of momentum,” Menlow said.
Red Hat also got a lift Thursday after it struck a distribution deal with Veritas (VRTS) Software.
VA Linux -- which also competes with industry heavyweights such as IBM (IBM), Compaq (CPQ), Dell (DELL), Gateway (GTW) and Hewlett Packard (HWP), all of which recently have rolled out their own Linux-based systems -- posted total revenue of $17.7 million and a net loss of $14.5 million for the fiscal year ended July 31, according to documents filed with the federal Securities and Exchange Commission.
Roughly 59 percent of its outstanding shares will be held by company insiders after the offering, according to the SEC filing.
The company also said it plans to reincorporate in Delaware after the offering because the state has laws that would offer protection from hostile takeover attempts.