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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."
So the strategy is to give away money to a dying comapny so that it can pursue its dream of vain lawsuits and dishonor?
Esoteric reference.
Comment removed based on user account deletion
This isn't enough money to pull them out of their revenue doldrums. It's just enough money to make them a huge pain in the ass. If it were $500 million we'd probably have *less* to worry about, because they might be able to actually pursue product-based revenue streams.
WARNING: there is a trojan on your
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.
Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws-Plato
hehe Great. That means they'll now still have money left when IBM/SGI/RedHat come seeking damages.
"LINDON, Utah, Oct. 16 /PRNewswire-FirstCall/ -- The SCO(R) Group (SCO) (Nasdaq: SCOX - News), the owner of the UNIX operating system, today announced it has received a $50 million private investment led by BayStar Capital, an investment fund that is a leader in providing negotiated private equity placements in publicly traded companies."
Was SCO ever legally determined to own Unix? I can't keep track of the things that SCO claims to legally own anymore.
Think how many starving children you could feed for $50 million... or how much cancer research you could fund. I mean seriously, they couldn't think of anything better to do with their money than give it to SCO?
Rank Presidents by th
to David Boies. SCO will be taking caring of the next few generation of Boies' family....
smd4985
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.
Peace and love, y'all
Apparently they are not just smoking crack.
They are trafficing.
134340: I am not a number. I am a free planet!
it is still very possible that the lawsuit with IBM may have merit
:)
Yes, for arbitrary generous definitions of possible and values of merit less than epsilon.
-
- - You can't take something off the Internet! That's like trying to take pee out of a swimming pool.
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.
Self Serving Sig: Hosting Comparison
"private equity funding"?? Does anybody else think this deal smells? These guys are just a front for some private investors, i.e. they supposedly solicited the the investment from some third parties after putting together the package for an equity purchase in SCO. I wonder who those third parties are? Well you'll never know because it's a private placement. This is just a device for concealing who is really behind the funding. If your ever able to dig down through the byzantine structure of corporate, partnership and limited partnership entities that are the private investors, I think you know who you'll find at the bottom of the heap; those who have an interest in seeing this litigation continue regardless of its outcome.
Slashdot announces that they intend to file suit against IBM for $5 billion dollars.
Commander Taco was reported as saying, "There's no basis for this suit, but that didn't stop SCO. Our case is just as strong."
In unrelated news: BayStar Capital is looking to invest $80 Million in Slashdot
Well, considering that SCO actually ARE a software company and can't seem to figure out what they own and whether code in linux infringes or not, I'd be fairly willing to bet Baystar's $50 million that Baystar's "experts" have even less clue than SCO... or you, for that matter.
:-)
Easy bet, too. It's not my money
Put another way - I'd trust SGI's assertions that SCO ain't got shit for a case more than I trust some VC firm's experts. Exhibit A: thousands of failed dot-com IPO's. Exhibit B: SGI's actual experience writing and selling IRIX.
I kinda suspect that SGI know the Unix codebase better than SCO right now.
Ce n'est pas un vrai mouvement de robot!
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...?
From the article:
"BayStar Capital looks to invest in growth-oriented firms with strong management, substantial market opportunity and solid, comprehensive business plans, and we believe that all of those fundamentals are in place for SCO to succeed," said Lawrence Goldfarb, General Partner, BayStar Capital. "SCO owns the most predominant UNIX software assets in the I.T. industry, has a 20 year history of providing trusted software solutions to end users around the globe, and an aggressive and seasoned management team focused on generating profitable growth."
Are you fscking kidding me? How does SCO continually manage to BS rich investment firms into believing it is more than just a frivolously-litigating, artificial-stock-inflating joke? Are investment firms really that dumb? Can I sue IBM and just get $50 million by pretending to be a player in industry?
-jag
http://starboard.flowtheory.net/
And people keep saying what you have said with far less evidence.
SCO's lawsuit (not their obviously cracked copyright claims) rests on their claim that anything IBM developed for use with UNIX being owned by SCO and thus it's insertion in Linux being a contractual violation.
Do you really think IBM would sign a contract like this? One that would assign ownership of all of their technical advancements that have been used with their UNIX property of another company? Even if they did, do you think that with all their lawyers on staff they'd miss a fairly obvious clause like that when they deliberated over contributing to Linux?
Sure, it's possible that everyone at IBM suffered collective brain failure, but they're profitable and working on technologies that people want. A useful company with customers - not desperate.
Contrast this with SCO. A company so obvious run by crack-addled simpletons that they can't keep their story straight from week to week. This could be an act, except that they're opening themselves up to lawsuits for damaging the reputation of competitors, false advertising, making false claims for manipulation of stock prices (pump and dump), etc. Considering that the execs at SCO aren't doing this through underlings to allow them to claim ignorance later, any punative damages are likely to be applied directly to the officers of the company if they're found to be breaking the law. If this apparent ignorance and these wild claims are made up they're taking an incredible risk.
It's a lot likely that things are as they seem. SCO is full of idiots who ran a company into the ground and are playing the USA game of random high-dollar lawsuits and threatening people with high legal fees until they settle out of court (the $699 invoices vs the legal threat).
Now that SCO actually has some money to throw around, this is the ideal time for all of us who support Linux for a living to file our class action suit against them for the damages their false claims have had on our ability to make a living.
After all, in this impromptu, roadside interview, Darl @ SCO basically states that they have to protect their income (6:42 into the conversation) and their employees' livelihoods. Those of us who depend on Linux for a living should protect ours too.
As an independent IT pro, I can honestly say that my company's bottom line can definitely use an injection. SCO's unchecked, continuing spreading of FUD has seriously impacted the number of companies implementing Linux (thus lowering the number of potential customers).
Let's face it, SCO's practically using the court system as its marketing department. That "courtroom marketing" just got the company a nice, fat $50M check. I don't see how they can get away with this right under the SEC's (apparently not-so-watchful) eye. It's so ridiculously obvious that they pumped up their stock with false claims and dumped it successfully for a huge profit, and now they're getting ready for a second round of pumping. I wonder how much the SCO execs will rake in this time around. (watch SCOX tomorrow)
SCO: Give me a copy of your source code, the Linux source code, and the BSD source code and I'll tell you whether or not your claims hold merit. My bet is that after I publish my results, your precious UNIX products will have nice, big GPL and/or BSD licenses on them. Either that, or your UNIX products will fit on a 1.44MB floppy after I remove all of the code you stole from the BSD project(s).
It's great to see that your Bayside stakehorse just dumped another bankroll of chips in front of you. I'll see your UnixWare and raise you one Linux kernel. Now call, fold, or get the hell out of the game. Whatever you do, make it quick before everyone notices you're dealing from the bottom of the deck.
-- Stu
/. ID under 2,000. I feel old now.
It was a typo.
They misspelled bye
.
134340: I am not a number. I am a free planet!
yes, i can see how only doing a mere 81.19B in revenue could be considerred small...
i mean - msft's revenue crushes IBM, at a whopping 32.19B.
oh wait, back up, reverse that... IBM does nearly 3x the revenue of MSFT.
IBM is *the* big boy... and they've been itching to pay msft back for a while now...
... hi bingo
From the PR:
The investment in SCO was structured as a private placement of non-voting Series A Convertible Preferred Shares, convertible into common equity at a fixed conversion price of $16.93 per share, which was the average closing bid price for the Company's common stock for the five previous trading days prior to the date of closing.
As someone else pointed out (but didn't get modded up since this is a site for tech geeks, not financial geeks), SCO has more than likely received what is generally known as "Death Spiral Financing." If BayStar believed in SCO, and SCO thought it had a future, the conversion price would have certainly been higher than the "average closing bid of the last trading days..."
Here's how BayStar makes money:
For those who aren't familar with shorting, this means borrowing stock you don't own to sell to someone else. You get the money, but you will have to give the stock back in the future, since it is borrowed. What you are anticipating is that the share price will go down, so you can buy the shares back for less than you got for them. Profit!!! The danger is the that stock will go up, which you means you will have to pay more than you originally got, causing a loss to you. So why is BayStar doing this? Easy, SCO just gave them enough shares to "cover their" short position. If the stock goes up, BayStar is covered. If it goes down, Profit!!! This is a big SHORT bet by BayStar. If SCO wasn't desperate, they could have told BayStar the conversion price is $20/share for example, something higher than the current average price when the deal was signed.
This most likely signals the beginning of the end of SCO.
Imagine how much harder physics would be if electrons had feelings! -Feynman, maybe
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.
every day http://en.wikipedia.org/wiki/Special:Random
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.
I can believe a VC company doing this. All those braindead VC people from the dotcom days were plaowing much more money than this into similar hairbrained schemes, so there doesn't seem to be a lack of stupidity in VC companies.
What it does highlight is the way the VC suits think, and what they actually know of technology. It shows that VC suits like companies with management that makes big bold and agressive statements. It shows that VC companies will spend money on words alone, because SCO's verbal tactics open them to charges of slander and libel, and even if they actually win part of the case (although I severly doubt it, IBM is going to kill them in court I think) there's still the RedHat and IBM countersuits to consider.
What this makes me think is that it's time to start skinning VC companies for money again. All you need is some arsewipe businessplan and some agressive statements and someone who's been in the business for a while and the VC loonies will throw $50 milloin at you.
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?
It is your personal duty to fight for what is right on a daily basis. Ignoring injustice is identical to approving
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
Cheap UK and US VPS
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...
It is your personal duty to fight for what is right on a daily basis. Ignoring injustice is identical to approving
Not Just that, their no. 1 investor is Vulcan Capital which is Paul Allen's investment vehicle. Allen was co-founder of Microsoft.
See my journal, I write things there
Jesus, how blind are these investors? How long do you think it will take SCO to make back $50 million in profits, assuming they succeed in their suit? I mean, it's not like the license is an exponentially growing market. In the ideal SCO-wins scenario (i'm talking from their point obviously), they'll sell a finite amount of licenses and view VERY little growth. It's not like they release a product every two years which requires their entire userbase to buy a new license (*cough*MS*cougH*). So how could SCO be seen as a company with huge growth potential?
They bought all non-voting stock.
This sig is the express property of someone.
The way this works, as I understand it:
e s% 2farchive%2fmag%2fissue95%2f1310018931.xml
1) BayStar loans Scox $50 million.
2) In return, scox owes baystar $50 million worth scox stock. NOTE: the 2.9 million shares is just an estimate based on scox's share price over the last 5 days. If scox share price falls to $8.50/share; then scox will owe baystar almost 6 million shares. Scox has about 13 million shares outstanding now - that means *huge* dilution.
3) baystar takes a huge short position in scox.
4) Since scox now has a cash position of $61 million, scox is now worth suing. Scox is already being sued by about six different companies, expect more to pile on.
5) Death spiral.
It's worth taking a quick look at the article.
http://www.redherring.com/Article.aspx?f=articl
You are wrong about this connection. The white paper is a fluff piece pushing Baystar's prime busines interest: PIPEs. As such, the numbers mostly refer to the whole PIPEs industry to make it look like Baystar has a much bigger interest than they actually have. It's like Charter Communications claiming that they are part of the "XXX billion dollar cable TV industry" when they only have a small percentage of the market.
In one chart, you can see that there have been thousands of PIPEs since 1995, including 612 in the latest year (2002). Of those thousands, Vulcan Ventures and Microsoft Corporation are in the top ten in dollars invested.
However, Baystar claims to have been involved with 90 out of those thousands of deals ($400M total). They do not detail their clients and cusotmers in this document, but they do list their "partners:"
Larry Goldfarb
Steven Lamar
and "strategic partners:"
Thomas Hicks (Hicks, Must, Tate, & Furst)
Steven Hicks (Hicks Capital)
Andrew L Farkas (Insignia Financial)
Louis C. Gerken (Gerken Capital)
Kianfilippo Cuneo (Baystar)
I'm curious about what kind of person would buy 18% of a company with the stipulation that they would have *NO* say in how that company is run.
By definition, preferred stock does not give the buyer a voice in the way the company is run. It does, however, get preferential treatment if the corporation folds. AIR (and it has been a long time), owners of preferred stock are reimbursed at face value when the company disolves. My guess (see disclaimer above) is that in this deal, the buy-back value is fixed somewhere around $20/share. Preferred stock claims are met after creditors are satisfied but before common stockholders receive the final distribution.
It is because of this preferential treatment at the company's deathbed that preferred stock has no vote. If you think about it, that's a necessary protection for the company's health.
To the extent that SCO's fixed assets exceed $50 million and its debt structure is sound, there is not much risk to the holders of this stock.
To my mind, this confirms that SCO is using a "shoot the moon" strategy and expects to either win big or self-destruct in the near future. In other words, SCO is not behaving as a normal going concern, and the usual methods of assessing its long term values don't apply.
We've been saying that on slashdot for months, speaking from a technical viewpoint. But that message has not been getting through to accountants and market analysts. This preferred stock deal, at roughly 20% of the company's total current market value and contributing about 90% of its operating funds, is something that accountants and market analysts do understand. This is not the kind of move those guys expect from a healthy company. Today might be a particularly good day to short SCOX, before the analysts start publishing their articles.
Of course nobody would ever follow market advise given freely on slashdot, right?