VA Linux storms Wall Street with 698 percent gain
By Dawn Kawamoto and Stephen Shankland, Staff Writers
Shares in VA Linux Systems soared eightfold today, setting a new record for the largest first-day gain of any initial public offering.
Shares in VA Linux priced yesterday at $30, but when they became available on the public markets today, the first trade was for a whopping 299.
"VA is the mother of all price pops," Richard Peterson, an IPO analyst with Securities Data, said of the opening trade.
Soon after the initial trade, the shares climbed to 320. When the dust settled, VA Linux shares had slid back to close at 239.25--a stunning 697.50 percent gain that sets a new record in a year that has been dominated by high-flying IPOs.
VA Linux Systems sells computers, primarily servers, that run Linux, a Unix-like operating system. It was developed by Linus Torvalds and countless other programmers and has made its way into the product lines of the world's biggest computing companies.
The dramatic rise in the stock eclipsed TheGlobe.com, which previously held the record for the largest first-day gain with a 606 percent increase.
VA Linux, which trades on the Nasdaq under the ticker "LNUX," also broke the record for the most money raised by a Linux-related company--collecting $132 million by selling 4.4 million shares for $30.
The company expected to sell its shares for $11 to $13. Due to high demand, it later raised estimated price to $21 to $23 this week. The shares eventually sold for $30.
The performance adds more fuel to an already white-hot market for Linux offerings and will likely cause several other companies to quickly file IPO plans. VA Linux is the fourth Linux-related company to trade publicly.
Collab.net, Caldera Systems, Linuxcare, SuSE and TurboLinux are just some of the privately held Linux companies that may jump aboard the IPO train in the near future. Caldera, for example, was rumored to be shopping around for investment bankers to take it public and TurboLinux may go public next year.
TurboLinux plans to announce unusual financing plans in January, chief executive Cliff Miller told News.com in an interview. He declined to elaborate on details.
"There's all this money flying around with financing and IPOs," Miller said. "I have to say we're no exception there. We are looking at another round of financing."
Linuxcare wants to have a stronger business before it goes public, though, said cofounder and executive vice president Art Tyde. Red Hat has "a pile of money, and now they get to figure out their business model. I've been pretty adamant that we have to build the value in the company first, so that even if this wasn't a Linux company, I'd still put my money into it," Tyde said in an interview.
"There's nothing in registration for Linux companies for the rest of the year, but this is a young industry with a lot of growth. Linux is hot and the wave of the future, and we should see a lot more of these offerings," said Jeff Hirschkorn, a senior analyst with IPO.com.
Like other industries that suddenly find themselves hot, Linux is also expected to grab investor attention.
For example, several years ago numerous companies billed themselves as a "push" technology company. Then dot.com fever erupted. Now, business-to-business and networking companies are in vogue, with companies in those industries seeing their stocks surge.
"These industries are like supernovas," Peterson said, noting they get increasingly hot before exploding.
Cliff Miller, chief executive of privately held Linux seller TurboLinux, said he's pleased that Linux companies are being well received on Wall Street. But he cautioned that potential investors should do their homework, studying the company personnel and the business plans before investing.
"Some of these companies are probably going to find a way to generate money, and they'll be very, very valuable. And many of them will go down the toilet," Miller said.
Linux stocks were hotter than usual today as several companies wedded to the open-source operating system climbed in late trading. Andover.Net, a news, programming and software site that went public yesterday, was up 23.27 percent today to 78.13.
Corel, which has begun selling a version of Linux designed for novices, was up 38.4 percent today, closing at 39.19. eSoft, which makes Linux-based servers, climbed 7.64 percent to 37, and Red Hat, the Linux seller that sparked the Linux IPO frenzy in August, was up 5.53 percent to 286.25.
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