SCO Investor Changing the Deal

Kurt Wall writes "According to this story, recent SCO investor Royal Bank of Canada appears to be changing its tune. RBC, along with BayStar Capital, invested $50 million in SCO, but now has changed the deal to give it veto power over the payment of the 20% contingency fees SCO's IP lawyers will get. As to the wisdom of the investment itself, an RBC spokesman would only say that the 'investment in SCO is passive, made to hedge an economic exposure resulting from client transactions.' Such as the SCO case collapsing, perhaps?"

Comments

Missing text in article

[RobertB-DC]

SCO has admitted that its action is designed to shore up sagging sales by wringing revenue out of its rights to Unix, an older operating system from which [something is missing here] Linux was derived.

Shouldn't the blank be filled in by the words "SCO contends"? As in, "Unix, an older operating system from which SCO contends Linux was derived."

I thought the whole point of the defense against SCO is that Linux is Unix-like, but *not* "derived" from Unix. Unless I'm wrong (a frequent situation), the newspaper article has swallowed a little too much FUD today.

Re:Missing text in article

[tuffy]

I don't think we need to read it quite that literally. "Derived", in this instance, can simply mean that Linux as an OS is a descendent of Unix, not necessarily that it derives any source code from Unix.

Re:Missing text in article

[Otter]

1) Linux is certainly "derived" from Unix for the purposes of journalism, whether or not it is derived from Unix source code.

2) It _is_ partially derived from Unix source code, as in the Symbol font non-example.

3) The question is whether Linux contains illegally used Unix source.

Surprise in court?

[MonkeyDluffy]

From the article:

IBM scored a surprise legal victory in that court case when a judge ruled on Friday in favour of IBM in SCO's trade-secret violation lawsuit against the computing giant.

Huh? Even SCO wasn't surprised by what happened last friday in court.

-MDL

Passive Aggressive bankers

[RealProgrammer]

They call the investment "passive", but they have control over SCO's biggest asset, the litigation division. They're watching this like a hawk, just as we are.

Re:Stock Charts

[steveha]

From earlier discussions on Slashdot, I gathered that there isn't much SCO stock available on the terms that let you short-sell it; and what is available was already grabbed by other short-sellers.

But there is one big problem with short-selling SCO stock:

Short-selling doesn't work unless you can predict when the stock will go down. Given that no rational and well-informed person would buy SCO stock, I'm stumped to guess why it's as high as it is, and twice as stumped to say exactly when it will go down.

You might be all set to short-sell SCO stock, and then Darl McBride might announce that SCO actually owns UNIX, BSD, Windows, MacOS, and CP/M; SCO stock doubles overnight and your short-sale, instead of making you money, loses you a lot of money.

steveha

In a way, good news

[multimed]

Taking the "RBC spokesman" at his/her word, this is pretty interesting. By saying that the SCO holding is a hedge, they're saying that they are invested/investing pretty heavily in the other side and just trying to protect themselves in the event that something crazy happens and SCO wins. It doesn't mean they believe in SCO just that they're invested deep enough into presumably companies with a large portion of Linux business that they've taken out an insurance policy just in case. Which is good news because you don't buy insurance because you think something bad is going to happen, you buy it to protect yourself in case it does, but hope it doesn't. At least that's my interpretation of "hedge."

Unfortunately as a result, they're helping prop up the stock price of an really awful company.

An IBM surprise?

[99bottles]

The story notes, "IBM scored a surprise legal victory in that court case when a judge ruled on Friday in favour of IBM in SCO's trade-secret violation lawsuit against the computing giant..."

I'm certainly no legal expert, but was this really that much of a surprise? From most legal info I've read about the case, it seem fairly accepted that SCO is really just fishing.

Re:Stock Charts

[worm eater]

Given that no rational and well-informed person would buy SCO stock, I'm stumped to guess why it's as high as it is, and twice as stumped to say exactly when it will go down.

The fact is, despite what /. would have you think, no one is 'well-informed' about this case. It is a huge tangle of intellectual property law, contract law, and source code. No single person really knows what SCO can prove, what IBM can prove, where the code came from, where it is now or who owns what. There's plenty of speculation, and I personally wouldn't buy into SCO, but investors like to gamble -- and given the fact that SCO (David) is taking taking on IBM (Goliath) I guess the conclusion is they must have some kind of case. Darl's putting up a BIG front, and that's what investors look for.

Re:They aren't altering the deal.

[Elwood P Dowd]

While this particular arrangement is uncommon, your objections to it would apply in any case of a stock issuance. Whether SCO's lawyers are paid in cash or in stock makes no difference to the shareholders.

Yes, of course the CEO can do this. If it is obviously not in the best interest of the shareholders they can sue him, but it could easily be in the best interest of the shareholders.

This deal was disclosed in exactly the fashion that it should have been as far as I can tell. And it was a judgment call on the part of the CEO. Exactly the type of thing he's paid for.