Shares in VA Linux Systems closed at $218 yesterday, down 8.88 per cent, on the previous day's trading after soaring by 698 per cent in its debut on the Nasdaq Exchange in New York on Thursday in the most successful initial public offering yet recorded.

VA Linux raised $132 million (€130 million) on the sale of 4.4 million shares on Thursday. The stock had an initial offer price of $30, jumping to $299 when the market opened. At the end of its first day's trading, shares were valued at $239.25.

The company, set up eight years ago by a Finnish student, Mr Linus Torvalds, rivals Microsoft NT in the high-end operating systems market.

VA Linux uses a version of the Unix operating system, the software which controls the basic functions of a computer. The system was developed by Mr Torvalds and a group of programmers based around the world, who communicated over the Internet.

While the company distributes the software for free, it makes money on the sale of support and engineering services.

The software, which can run on several platforms including PCs and Macintoshes, has become extremely popular, not least because it is free.

It has been embraced by major computer makers, who are now offering it on some of their systems. Leading software companies have also developed applications for the system.