Red Hat – 1999-2000

I first ran into Red Hat Linux when I joined Cygnus; it was one of the platforms we supported. As a matter of fact, it was the de-facto platform for developers, and as a Windows guy (no Macs at Cygnus), I was at once pleased, and aghast. Pleased because the command-line tools were real and worked and familiar. Aghast because the GUI editors sucked and the compiler was s-l-o-w to compile large amounts of code. Not Red Hat’s fault. To be fair, the people working on gcc had not made execution time a priority in a while, but still… And I hated the default window manager, but was not going to learn others. I had work to do.

A few months into my tenure at Cygnus, a software company doing products for NextSTEP went out of business. One of my employee’s spouses worked there, and he called her to collect friends, and we could come over and take whatever wasn’t spoken for. I got myself a Sun SPARCStation 5. Oh, boy!

Well, I did not have a Solaris license. Those were expensive (and there were none sitting around in the detritus of this company). But I could download Red Hat 4 (I think) for SPARC, and then find a CD burner to make a CD with (builtin burners were not a normal thing in 1998). But I found one, and I installed Red Hat Linux on my SPARC 5 and setup my own mail server. I figured that if any hacker tried to exploit any weakness, they would be sending x86 instructions and their attempts would just crash or error out.

The machine did not run for very long before it died. Sigh.

Then Red Hat started to make news. Red Hat decided to go public in 1999. Before they went public, they did something unusual. They identified several key people on the open source community who made important contributions to significant pieces of software that made up Red Hat Linux, and invited them to be investors in the IPO itself. One of those fellows worked for me on GDB. He got his invitation, and decided to participate, only to be thwarted by the investment bank’s rules about net worth and such. Almost none of those invitees actually had the ability to invest; Red Hat would have been better off just issuing them stock options.

Red Hat’s IPO was one of the stories of the dot com boom. They opened on August 11, 1999, at $14/share. It soared up very quickly to prices around $150/share, and then backed off a little.

One Wednesday late 1999, I heard a rumor that Red Hat was going to acquire Cygnus. I never paid attention to these things; after all, it was just a rumor! Of course, all rumors of this sort start somewhere… This rumor swirled around in the hallways. On Friday afternoon, about 2:30 PM, I caught one of the senior people at Cygnus painting all of the little hats on the men on the foosball table red.

Monday came, and we were ushered into an all-company meeting, where it was announced that Red Hat was indeed acquiring Cygnus.

We were given a formula for how to convert our Cygnus shares to Red Hat shares for purposed of taxes. I had some incentive stock options, and decided to buy some right after the new year, right before the merger was to complete. However, there was a wrinkle.

Red Hat’s corporate headquarters in North Carolina was an open-office plan. Everybody could hear everything going on in the office. What this meant for us was that every Red Hat employee was considered an insider for stock trading purposes, and we could only buy and sell stock during an open trading period. Furthermore, employees at Red Hat who were employed at Red Hat on the day of the IPO had a six month blackout period, and then had to wait for an open trading period.

Well, we weren’t part of that blackout, but we were subject to the open trading period. We found out that the deal was going to close on a Thursday, and the open trading period, which was a couple of weeks, would have been already open when that happened, and the trading period was going to close on Friday. The Board of Directors extended it one day to give Cygnus people a chance to trade. Wow. 3 business days.

I wanted to sell as much as I could. Here is what had to happen:

  • I had to call some bank in New York somewhere and get them to fax me a form to fill out requesting my stock certificates.
  • I had to get that form notarized.
  • I had to FedEx that back to the bank in New York. No faxes here.
  • They had to print the certificates, and Fed Ex them back to me.
  • I could then deposit said certificates with my broker, and then I could trade.

Some people got their certificates in time to sell on Monday. I did not. Mine came Tuesday morning. At the time, the stock price was about $120.

But I could not sell according to Red Hat. I could be fired if I did. What I should have done was walked into my boss’ office with my cell phone in my hand, said “I quit!” to my boss, and “Sell” to my broker on the phone, and then asked for my job back. If my boss said “No”, the proceeds could keep me going until I found another job. What I did instead was wait until the next open trading period.

It was in April, and Red Hat stock had fallen to about $40/share.

Sigh.

I made money, but still, leaving $80/share on the table….

And I was now working for Red Hat instead of Cygnus.

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