Packaged Linux vendor Red Hat Inc made the right decision by going public despite a recent lull in technology stocks, as the company’s shares tripled in value on the Nasdaq market after an initial public offering. Durham, North Carolina-based Red Hat sold six million shares at $14 each – the top of a price range that was increased earlier in the week – and then saw the stock close at $52.0625, a 272% gain, after trading as high as $56.75.
The shares opened the day at $48.50 and never traded below $40 in the session. Total volume was 17.88 million shares, making the issue not only the most advanced of the day but the fifth most active in share volume and the ninth most active in total dollar value.
The success of the offering by Red Hat comes as more than just a vote of confidence in the company. It bodes well for investor confidence in Linux and the open source community as a whole and could hasten similar public offerings from the likes of VA Linux Systems Inc, Caldera Systems Inc, Linuxcare Inc, and Cygnus Solutions Inc.
The offering was led by Goldman Sachs & Co, with Thomas Weisel Partners LLC, Hambrecht & Quist LLC and E*Offering Corp acting as co-managers. The underwriters were granted an option to purchase up to 900,000 additional shares to cover over-allotments. The shares are trading under the ticker RHAT. Red Hat plans to use the proceeds from the sale to fund international expansion, expand its web portal and build up its support services business.
