Some of the Linux geeks who helped Red Hat Software make its millions will benefit from the company's IPO after all.
Online brokerage firm ETrade finally allocated some Red Hat shares to customers who had signed up for the hot stock.
See also: Geeks Tip Their Caps to Red Hat- - - - - -
A series of technical and communication snafus by ETrade, spurred after the stock price jumped in the last few hours before offering, had potential investors complaining all day.
The stock soared to more than 270 percent from its list price Wednesday, closing out at US$52. Heavy trading continued into Thursday, with Red Hat (RHAT) trading midday at US$71.50.
Many frustrated Red Hat fans who are ETrade customers spent most of Wednesday on the telephone with the company's customer service department, trying to find out why their orders had not gone through. ETrade finally sent out confirmations to some customers late Wednesday, with a few coming as late as 9:10 p.m. EDT, according to discussion-group postings on Slashdot.
"The good news is they [ETrade] made good on the original deal," said longtime Linux user Frank Byrum, who finally heard about his allocation late Wednesday. "We didn't get all of our allocations, which is not what I expected, but if nothing else, a little bit of yelling got us where we wanted to be."
ETrade officials declined to comment.
Slashdot, which bills itself as "news for nerds" and is popular with Linux aficionados, was flooded with messages from ETrade customers who moaned about the difficulty of getting in on the offering.
But what many of them failed to realize was that the intense interest was exactly what drove up the price -- and led to their being shut out -- in the first place.
A successful IPO is by nature difficult to crack into because of simple supply and demand, as the Securities and Exchange Commission explains on its site.
"It is unclear how 'hot' the offering will be until close to the time when the shares start trading," explains SEC page "Why Individuals Have Difficult Getting Shares."
"Since 'hot' IPOs are in high demand, underwriters usually offer those shares to their most valued clients."
However, the typically feisty Slashdot posters were nearly unified in their online criticism of ETrade. Shortly after the offering was priced at $14 per share -- up from its original $10-12 price range -- ETrade sent emails to registered customers interested in the offering. The email told customers to call if they wanted to change or cancel their order because of the price change.
Some customers didn't call back because they didn't think they had to. Others called back within 30 minutes of receiving the message and were told that the offering was already closed. Still others never even received the message.
"It is annoying and a little depressing," was one Slashdotter's lament. "Red Hat is a company I believe in. Maybe next time, I'll be one of the lucky ones."
This marks the second time ETrade has run afoul of Linux-heads. Red Hat, which essentially packaged and marketed the work of the open source community, had offered 800,000 shares as a thank you to the geeks who had helped develop the program. ETrade had imposed minimum net worth requirements, shorting out plans for many who hoped to cash in on their programming efforts.
