SCO gets $50 Million Investment

sjbe writes "It was announced today that SCO received $50 million in private equity funding. The lead investor is BayStar Capital which has invested in Roxio among other companies. This gives SCO a pretty big war chest to fight IBM. Before this investment SCO only had a few million in cash remaining. If you thought SCO was annoying before, this won't help."

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Good ...

[molarmass192]

now IBM will have something to collect when it wins on those patent infringement suits they've filed against SCO. $50 million or not, it's game over come April 2005 for these guys.

Sweet?

[MrKinkade]

hehe Great. That means they'll now still have money left when IBM/SGI/RedHat come seeking damages.

All about BayStar Capital

[Anonymous Coward]

You have to remember who exactly BayStar Capital is.

They're the folks who are known for balancing several chairs on the nose of their chief executive. In fact, it's well known that the nose in question is big and powerful.

Therefore, it was only natural that they'd stick their nose up SCO's butt in hopes to find a prize.

Don't believe me? Check out their website.

In any case, I love their IT guy! Here's a quote from their website:

Steven Griffin is the Chief Technology Officer of BayStar Capital. Mr. Griffin brings ten years of information technology experience encompassing both the public and private sectors. Before joining BayStar Mr. Griffin was the Lead Systems Analyst at the San Bernardino County Fire Department.

From 1995 to 2000, he oversaw the San Bernardino County Fire Department's deployment of their wide area network and the maintenance management ERP project. From 1992 to 1995, Mr. Griffin worked as an independent contractor deploying local area networks for law offices and Realtors.

Mr. Griffin is currently pursuing his MS in Computer Science. He received his Bachelor of Science degree in Computer Science from California State University San Bernardino in 1998.

Wow! If he is their IT guy, I should be the Pope. Or even better.

Cui bono

[whig]

Who controls BayStar?

Answer that question, and it will probably become obvious why they would be willing to "waste" $50 million.

SCO is just a foot soldier in a war that is being fought by Microsoft and associated proprietary software firms against the adoption of Linux as the dominant Operating System for the next century.

They are buying time, for one thing. Every day this FUD campaign drags on, slows the rate at which corporations switch their infrastructure to Linux. For all that those in the know realize what a crock of steaming shit this is, the courts are unpredictable at best, and PHB's are a conservative lot. Many won't bet their future on an OS which is the subject of litigation because they cannot be certain of the outcome.

SCO will die. But that's what foot soldiers do. Meantime, those pushing them forward are happy to lend them all the resources they need to prolong the fight.

Re:Cui bono

[bm_luethke]

Who controls BayStar?

I doubt microsoft. While, according to this they are in the top ten money movers at about 500 million, that pales in comparison to Vulcan Ventures ~1.7 billion.

Now baystar, being an investment firm, may be acting on behalf of microst in investing thier money, but Microsfot hardly controls them. The accusation could be true for any investment firm that purchases stock.

Most likely this is an investment firm planning to sell short and make a quick buck without a big amount of risk. Had this really been microsoft or baystar attempting to give SCO the funding to pursue a legal attack on linux 50 million is peanuts.

All depends on the odds...

[jrrl]

They are gambling, as with any investment. They seem to think there is enough of a chance that they will win, that they will get some return on the investment. Same thing as Deutsche Bank.

DB apparently thinks the odds are between 1 in 3 or 1 in 4 that they'll win. They see a $180 per share upside if SCO wins, but a zero value if they lose. So, if you look at it as P(win) * $180 + (1-P(win) * 0) = their target of $45. So, P(win) is 1/4.

Alternately, you can look at it as either $30 upside (from ~$15 (easy math, here folks, it's late)) vs. $15 downside. In which case, P(win) is 1/3.

If Baystar buys into those odds, then this is a good bet for them. Most venture capital funds are satisfied with one home run and two break-evens out of ten tries. This would be a home run for them if SCO wins. And $50M really isn't that much money.

All that said: Man, I want SCO to just go away!

Sigh.

*sniff sniff* Smells like conspiracy to me...

[Kingstrum]

Hmmm, let's see:

* - First, it becomes public that many of the top SCO execs are cashing in big stock options as they get pumped in the media as the thorn in Linux side. Several collect tens of millions of dollars from stock not worth a nickle prior to the IBM "lawsuit".

* - Next, we never actually see any of the "evidence" that is to be used in the case, just small portions of what is promised to be "major violations of IP" that they may -- or may not -- actually own. This issue gets set aside and taken as a given that they just own it all...even the stuff that's long been known to be in public domain.

* - Now, after a speculative report on possible billions of dollars in licensing that might be collected (assuming they have any claims of substance and they win the lawsuit) and sweet talk from a large investment bank, suddenly some dipshit VC gives them a lousy $50 million...and they now have $61 million in the bank. This being very odd since their last SEC filing mentioned that all of this was very speculative and, if it doesn't pan out, they may be tits up.

* - Finally, throughout the whole thing, every promise to keep on point and it's "just a licensing spat" continue to be proven false and the threats expand to encompass just about anything ever touched by Linux.

Now I'm not a lawyer nor a stock broker, but it sure seems to me like this is just a slow-motion Bait-n-Switch with a Pyramid Scam/Stock Swindle twist. In the '90's we used to call this a "Pump-n-Dump" (build up the buzz, sell off the stock, run to the Bahamas). Apparently the boys in the boardroom figure if they just make their money on the front end, fine; but, if it turns out they might actually have something like $3 billion coming to them on the back end, so much the better.
Wonder if anyone has contacted the SEC and DoJ to see if this is all on the up-and-up...?

This is actually great news, SCO is dying.

[Lost Penguin]

Read this Story about another dotbomb and BayStar investments:
Text from Redherring.com
www.redherring.com/Article.aspx?f= articles%2farchi ve%2finvestor%2f2000%2f0420%2finv-worldonline04200 0.xml

World Online stock shock rocks Europe

As youthful European dot-com companies go public, they better stick to the rules and offer transparency, or their valuation -- and their investors -- will suffer.

For someone who liked to brag that she had made her first $30 million before she was 30 years old, Nina Brink's justification for selling off a large chunk of her stake -- at the bargain basement price of 6 euros a share -- just before her company went public in the Netherlands last month rang hollow.

Her reason, that she "was securing the financial future of her family," didn't seem sufficiently sound, especially to the thousands of investors who have collectively lost some 4 billion guilders (about 1.71 billion dollars) when World Online 's (NL: WRDOL) shares plummeted as the news of the move was made public.

This wasn't supposed to happen to World Online, much less to Europe's nascent Internet economy. The incident, however, has sent both the company and the sector into a tailspin. Investment banks are wary of the increased scrutiny that company-share prospectuses will now receive, and Europe's new retail investor class worry that dot-com companies might only be hype after all.

The incident throws a spotlight on the degree to which investors are protected by strict transparency rules as Europe's stock markets compete to woo dot-com firms to list on their exchanges. Also, it marks a mighty blow to Ms. Brink herself, who previously was hailed as a role model for women seeking a place at the top of Europe's dot-com corporate echelon.

WOE TO THE WORLD

World Online, widely regarded as one of Europe's success stories, is the paragon of all that must be avoided as the Net boom moves to Europe -- and the lessons from the fallout are many.

The Dutch Internet service provider (ISP) seemed to have decent management, an ever-growing brand, and the ability to scale quickly across Europe, as evidenced by its pan-European buying spree of ISPs over the past 12 months. Along with Lastminute.com -- a recently public company whose stock is similarly trading below its offer price -- World Online was often cited by investment bankers and Internet entrepreneurs as the poster child of European startups that would show the U.S. that the continent didn't need to rely on dot-com imports.

Yet trouble began just days after the company went public on March 17, when news surfaced that Ms. Brink had sold 6.35 percent of her 9.48 percent in the company to three investment funds, at a share price of just over 6 euros each. One of these funds was Baystar Capital, a private U.S. investment fund, which dumped 1.2 million of its shares, or 9 percent of its stake, on the day of the IPO. Baystar, it turns out, hadn't agreed to a lock-up, and a closer reading of the prospectus revealed that Ms. Brink was to share in the profits of any of Baystar's sales. To investors, it looked as if Ms. Brink was trying to get around the lock-up. More importantly, it looked as if she lacked confidence in her own company.

Investors fled the stock, sending it into freefall. Today, it trades at just under 15 euros, a 65 percent drop from its offer price of 43 euros. Ms. Brink resigned from the company on April 3 after being pushed out by large institutional investors following what the Dutch media dubbed a stock market scandal. The company, however, has retained a role for her on its advisory board.

SCO execs are seeking to get rid of all their stock cheap and legal.

Re:bingo- found it

[way2trivial]

sorry
try this
if that doesn't work, go to google, type in "baystar capital microsoft" it is the PDF link that is for me third down the page.. once the PDF opens, search for microsoft. since october 2002, it looks like they've put 500 million into baystar deals.

SCO Has "Exclusive" UNIX trademark License?

[codermotor]

I found this wording found in the last paragraph interesting:

"UNIX is used pursuant to an exclusive license with The Open Group and is a registered trademark of The Open Group in the United States and other countries."

Am I misreading this or is SCO now claiming that they, and only they, have the right to use the UNIX mark? I guess if their story is that they already own all UNIXes everywhere (and their derivatives) then this attitude makes sense to them.

Preferred shares on a public stock?

[iendedi]

Can someone explain how preferred shares can be issued on a publicly traded company?

I thought that publicly traded companies had to conform to regulations that wouldn't allow them to issue preferred shares due to the nature of Preferred shares that gives them preferrential treatment in a manner that adversely affects public stockholders (e.g. acquisition, bankruptcy, etc..). If you owned SCOX before these shares were issued, you have just now been (A) Diluted without being afforded normal conentions of protection and (B) Had your stockholder rights pre-empted without being able to exert your normal rights to vote your stock.

Someone please help clarify this. Is it even legal?

Deep Pockets

[rf0]

Sco might have $50 mil but IBM has a couple of billion. I think I can see who is going to last longer in a drawn out court battle

Rus

SCO now has money to pay lawsuits

[iendedi]

Awesome. Come RedHat, come IBM, come classaction filers... The chests are full, the violations widespread... SCO welcomes their new lawsuit overlords...

How fun... Now that they have money, it is time to sue the pants off of them and have the aside satisfaction of knowing that we will be taking Microsoft's money...