VA Linux Smashes IPO Record, Soaring Almost 700%

Updated from 1:53 p.m. EST

VA Linux Systems (LNUX) skyrocketed through the stock market Thursday, picking up the biggest first-day gain ever for an initial public offering.

The company's shares climbed 209 25/32 -- or a whopping 698% -- to close at 239 25/32. That broke the record set by the IPO of theglobe.com, (TGLO) which posted a first-day gain of 606% in November 1998.

At one point Thursday, VA Linux traded as high as 320, nearly a tenfold gain.

In after-hours trading, the stock jumped to 252, according to Instinet.

The success of VA Linux may have further emboldened the lead underwriters for FreeMarkets (FMKT), an online business-to-business auctioneer. Goldman, Sachs and Morgan Stanley Dean Witter priced the offering at $48 a share Thursday evening, $7 above the midpoint of the expected price range. The underwriters had taken the extraordinary step of nearly tripling the expected price range for the offering on Tuesday.

Two other new issues also attracted attention in the frenzied IPO market Thursday. Jazztel (JAZZ) rose 247% and Fogdog (FOGD) notched a 19% gain. But even Jazztel's climb paled in comparison to the VA Linux IPO.

VA Linux, which makes computer systems and servers that run the Linux operation system, offered 4.4 million shares at $30 a share, raising $132 million. But by the market close on Thursday, those shares, representing an 11% stake in VA Linux, were worth $1.05 billion, meaning the company had left more than $900 million on the table as profits for investors. VA Linux now has a total stock market value of $9.5 billion.

The enormous gains came even though VA Linux's lead underwriter, Credit Suisse First Boston, had raised the offering price to $30 a share from an expected range of $11 to $13 on Monday.

The enthusiasm for VA Linux, which is based in Sunnyvale, Calif., seemed to indicate that free operating systems and software have hit full stride among programmers and that momentum is everything when it comes to IPOs.

On Wednesday, another Linux-related IPO, Andover.net (ANDN), more than tripled in its first day of trading.

The IPO market is now watching to see how FreeMarkets does. The stock is expected to begin trading Friday. The FreeMarkets offering of 3.6 million shares raised nearly $173 million for the Pittsburgh-based company. It represents about an 11% stake in the company, giving it an initial market value of roughly $1.6 billion.

Among the other IPOs traded Thursday, the American depository receipts of Jazztel jumped 42 to close at 58 15/16.

Jazztel priced its offering of ADRs at $17.447 each, or 17 euros, underwriter Merrill Lynch said Wednesday. The Madrid-based firm raised $176.65 million, or 172.13 million euros, after offering 10.125 million ADRs. The deal was priced above the expected price range of $13 to $15.60. Still, by the end of the day, the shares were worth about $597 million.

The upstart telecom company offers Internet access and phone service. The telecommunications and data service provider also plans to offer voice services (local, long distance, and international) and data services (leased lines, frame relay, and Internet protocol) to small and midsized businesses.

Fogdog rose 2 1/8 to 13 1/8, hinting that the IPO euphoria was broad enough to accommodate an online sporting goods retailer.

The company, based in Redwood, Calif., raised $66 million through the sale of 6 million shares in the offering. This initial offering at $11 per share was also priced above the initial expected range of $8 to $10. By the end of the day, the new shares were worth about $78.7 million.

Fogdog offers more than 500 brands of apparel, footwear, and equipment, and boasts a unique partnership with Nike (NKE), which is letting Fogdog sell its full product line in exchange for warrants to buy 12% of the company.

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