Late IPO change left many red-faced

Weeks ago, Red Hat sent out an invitation to participate in the initial public offering to hundreds of programmers and others who had helped the Linux effort. But a change yesterday in the expected price range of the offering left many scrambling with E*Trade today to reconfirm that they wanted to participate.

The hurdles today were a sequel to a problem two weeks ago when many found themselves unable to participate, because they didn't meet requirements for minimum net worth. The wrinkles undermined a goodwill effort on Red Hat's part to offer 800,000 shares to the members of the open source community who had helped to develop Linux.

The experience has been a rude awakening into the world of business for some developers.

"I feel humbled by this--if I do indeed make money from this, I will be generous to the Free Software Foundation," one person wrote at the Slashdot "news for nerds" discussion site, which acted as a clearing-house for people trying to figure out what to do.

Despite the hurdles, many in the Linux realm were giddy at Red Hat's big day.

The tripling in stock price was "fantastic," said Ransome Love, chief executive of Caldera Systems, another Linux seller that's considering going public. "It helps validate Linux, and it lays the groundwork for other companies."

It's essential that Linux companies share financial gains with the open source community, Love said. "You have to contribute back. Linux is not anybody's technology," he said.

Problems are bound to emerge, he added. "The first of any category is always a learning experience for the investment community," he said.

Ironically, the hurdles today were caused by an increase in the price range for Red Hat stock, an indication that there is high demand. Yesterday, the company raised its expected price range from 10 to 12 per share to 12 to 14, eventually settling on the latter.

That change had two affects: First, people who had sent enough money to cover the minimum of 100 shares at $12 apiece had to send more money quickly. Second, people had to reconfirm that they wanted to participate at the higher price and got conflicting messages from E*Trade about whether they could do this in person or had to go through the company Web site.

Erik Walthinsen, an open-source programmer working at the Oregon Graduate Institute was one person displeased by the situation. He thought the repricing wouldn't affect him, because he had specified earlier with E*Trade that he was willing to pay as much as $20 per share.

But there was only a very short period of time available today to reconfirm interest, he said.

The experience left Walthinsen annoyed. "It's freaked out a lot of people," he said. "If E*Trade weren't the IPO guys, I would go with someone else. They have managed to screw with everyone that I've heard from in almost as many ways as there are possible."

Another unhappy trader was William Affleck-Asch, who was an ordinary investor, not a member of the "affinity" group to whom Red Hat had extended the special deal. He had reconfirmed his interest by phone yesterday, only to find out today he was supposed to reconfirm through the Web during a very short period of time. He has requested that the Securities and Exchange Commission check into the matter.

Affleck-Asch said he was "disgusted" with the situation.

E*Trade apparently changed course and began calling some participants to tell them they could still get an initial allotment of 100 shares even if they didn't reconfirm, Affleck-Asch said.

E*Trade and Securities and Exchange Commission representatives were not available for comment.