marketwatch.newsalert.com
Red Hat IPO soars 286 pct despite
rocky IPO market
Reuters Story - August 11, 1999 16:37
(adds details, analyst, executive comments, previous New
York)
By Therese Poletti
SAN FRANCISCO, Aug 11 (Reuters) - Red Hat Inc. stock
more than tripled after its initial public offering
Wednesday, as excitement over the renegade Linux
operating system helped it buck the downward trend in the
IPO market.
Red Hat, based in Durham, N.C., is the biggest distributor
of the Linux operating system, a free version of the UNIX
operating system that is challenging Microsoft Corp. in
some areas such as the Web server market.
The company raised $84 million though the offering of six
million shares after pricing its IPO at $14 a share, the top of
its price range. Late Tuesday, Goldman Sachs, the lead
underwriter, raised the price range to $12-$14 from
$10-$12.
Red Hat's shares closed up 38-1/16 to 52-1/16 in very
heavy volume of almost 18 million shares on the NASDAQ.
Red Hat's surge was an anomaly Wednesday and other
IPOs did not fare as well, posting much smaller gains.
Mortgage.com was a "broken" IPO, falling below its
offering price on Wednesday.
The market for Internet-related IPOs has deteriorated in
recent days. Many offerings are being scaled back or put on
hold by their underwriters as analysts have said the window
for Internet-related IPOs may be closing for now. But in
Red Hat's case, investors were apparently enthused about
the emergence of the Linux operating system.
"This has zero to do with the IPO market. It reinforces that
when the broad Internet market settles down to better
valuations, investors will be there for the right stocks at the
right prices," said David Menlow of the IPO Financial
Network in Millburn, N.J.
At the LinuxWorld trade show in San Jose, Calif., the
second major trade show this year to focus on the Linux
operating system, many eyes were glued to computer
screens, watching Red Hat's stock price, industry
executives said.
"Every single computer has the E*Trade screen up," said
Larry Augustin, chief executive of VA Linux Systems Inc.,
a developer of computer systems and servers running
Linux. "I think people are pretty happy. It's almost like a
Wall Street referendum on Linux."
The quirky Linux community has grown up out of the open
source community, where developers share their software
and its source code over the Internet, with the goal of
creating the best software by sharing bug fixes, upgrades
and improvements.
Red Hat and other Linux distributors package Linux and
sell it, and offer service and support for the software that is
not owned by any one company. The Linux kernel, the
core of the operating system, was developed by Finnish
programmer Linus Torvalds, who manages any updates to
the operating system, which are made by a far-flung group
of programmers.
Red Hat also has an impressive group of investors, ranging
from Intel Corp. , to International Business Machines Corp.
to Compaq Computer Corp..
At the LinuxWorld trade show this week, more major
computer makers continued to announce support for Linux
and more products were introduced for Linux. |
