The initial public offering (IPO) of four million shares by VA Linux Systems sent US investors into a frenzy on Thursday as they tried to buy any stock that was remotely connected with the Linux operating system.

The firm sold its shares to institutional investors for $30 each, but by the time they arrived on the open market later that morning, they were valued at $299. When the US markets closed several hours later, the shares had slid back to $239.25 - a 698 per cent gain on the day, which was a record.

This gave VA Linux a market capitalisation of nearly $10 billion despite minuscule sales and no profits. For the fiscal year ending in July, the company generated revenues of $17.7 million, although for the first three months of this year, which ended in October, its turnover rose to $14.9 million.

But other Linux related companies were also caught up in a mania, which Chris Galvin, an analyst at Hambrecht and Quist, described as "dot.com-like", although he added that he believed Linux was here to stay.

However, Walt Keller, the chief executive of Graphon, which provides Web-based software that runs on Windows, Unix, and Linux applications, claimed that the rocketing share prices were an overwhelming validation of the Linux challenge to Microsoft Windows.

Corel's share price rose $10.88 to $39.19, while Red Hat's rose $15 to $286.25 - the equivalent of a 1921 per cent increase on its IPO price in August.

Andover.net, a website dedicated to all things Linux, was also caught up in the euphoria. It went public on Wednesday and saw its stock price jump to more than $63 from the offering price of $18. It continued climbing on Thursday to close at $78.88.

But investors are betting on the future, and research company, IDC, estimates that Linux shipments will soar 25 per cent each year between 1999 and 2003, eclipsing the 12 per cent growth rate of all other workstation operating systems.