Slashdot Mirror
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?"
Looks like the banks realize their "investment in SCO is passive, made to hedge an economic exposure resulting from client transactions." "The court gave SCO 30 days to provide IBM with information and source code to prove its allegations. SCO, the ruling stated, must give IBM "all source code and other material in Linux ... to which [SCO] has rights; and the nature of plaintiff's rights."
Take a dump or get off the pot!
So RBC does business with Red Hat, and needs to hedge against them going bust when SCO wins? Or they are hedging short positions they already had in SCO because of selling call options or the like to clients?
It would make some sense if they said 'we have lots of Linux boxes, and we want to get cash if SCO wins to cover the licence fees'...
-- Ed Avis ed@membled.com
Is it just me or does this article seem to have a Pro-Sco slant towards it?
:-) (emphasis on surprise)
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 Linux was derived.
Derived is used rather loosely here. To a casual looker, it might sound like SCO is in the right.
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.
Whoa!
SCO had been pressuring the courts to force IBM to reveal its Unix and Linux source code so SCO could prove that IBM was using stolen code. But the judge ruled that SCO would have to present its own Unix source code first and identify which software code had been stolen.
That does'nt make sense considering just about anyone can look at Linux source.
Bloomberg hasn't picked this up yet. Bloomberg is slipping. Yahoo Finance doesn't have it yet either.
This is an unusual investment for a bank. It's a pure speculative play. Their management is probably kicking themselves for buying in at the top.
No, its a pipe deal. Somebody else is pushing money to SCO through RBC.
One user states:
This seems to be making sense. The investment companies are playing both sides against the middle. If SCO wins, the consequences will be likely be lower earnings for companies that must pay the licensing fees. OTOH, the investment bankers who have invested with SCO will be able to offset those losses by their earnings from SCO. If SCO loses, they lose their investment, but it is not that much money.
As far as the lawyer veto, I think this is just another hedge in case SCO loses. The bankers want to keep the money instead of paying for currently promised obligation. In any event, they will probably just go court and claim that the lawyer fees are excessive. No one likes lawyers, and even in the case where a lawyer funds a litigation, such as the tobacco case with the states, the courts seem willing to put aside contractual obligations to the detriment of the lawyers.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
did anybody else notice the other reason RBC has
? f= features
."
been in the news
http://www.cfo.com/article/1,5309,11460,00.html
lately? To quote:
"Goldin said that Bank of America and Royal Bank
of Canada knew of fraud in Enron-related
transactions. .
Charming profile they're developing of late.
The insiders *are* selling their shares. Darl isn't ... because he's already sold them. However, he's got another 600K options coming due soon. If ... he ... can ... just ... keep the stock up, he'll have "earned" a few million more for himself. And in any case he can always vote himself a 2M bonus for having attracted so much new investment.
-russ
Don't piss off The Angry Economist
2) Boies' firm was retained, and they are billing hourly (granted, some of their billing is at 2/3 the normal rate, but that's still not cheap). This is in addition to any contingency factors that Boies' firm can also get money on. SCO had maybe $10M in the bank, and if one took about all of their accounting tricks, they're probably spending an additional 2M per quarter in legal fees. Given this burn rate, they wouldn't be able to last if they could get the money in 2004.
3) from the "benefit of the doubt" side, even if SCO was confident that it would win the case, when you take into account appeals, IBM likely wouldn't have to pay until 2007; possibly later.
4) Even given the $50M pipe deal, check out the yahoo financial SCOX message board; someone posted an analysis how unless they get more mystery money from SCO Source lincensing they currently can't survive long enough to make it to trial; much less to the appeals.
They'll need another PIPE (which they won't get), or someone is going to have to pay SCO a lot in licensing (when you do that, your name is out) for SCO to survive to the trial even *with* the $50M deal.
Granted, if you thought that SCO was telling the truth, only examined the recent pro forma quarters, and believed Skiba's stock analysis I can see how you'd wonder why they needed the $50M given that they're over a barrel now. However, when one knows this is just a stock scam, it becomes obvious.
I am surpised that the main stream press did not make more of the fact that David Boise et al did not appear in court last week. You would think the law firm would at least have a representive present. Oh I would love to be a fly on wall back at SCO central right now.
If I was a SCO sucker^h^h^h^h^h investor this would be a very troubling sign. In fact, Boise's presence is the only thing that really gave the lawsuit credibility - regardless of the fact that he lost the last two highly publized lawsuits.
The short percentage on this stock is huge and that can help keep the stock price, up strangely enough. As the stock drops people complete the short transaction, which is "buying back" the shares that they sold earlier.
That's like expecting a bailiff in some district court to know what the Supreme Court's decision was today on McConnell v. FEC.
What?
David Boies and his fellow Boies, Schiller & Flexner LLP lawyer Mark Heise are SCO's attorneys in this case, but the software company was represented in a court skirmish last week in Utah between SCO and IBM Corp. byDarl McBride's brother Kevin. Kevin McBride, according to West Legal Directory, has a private practice in nearby Park City, Utah, where he specializes in litigation and appeals, not corporate-contract or intellectual-property law.
Makes things even more fishy. Looks like the McBride family is going to make out nicely either way, SCO wins Darl gets a big payout, Kevin gets a cut of attorney fees, SCO looses and Kevin still gets a cut from the contingency plan.
Also to reference Linux as being a derivitave of the "older operating system" Unix is wrong on a couple points. First has already been pointed out, Linux is designed to work like Unix but was not in any way derived directly from its source, which is actually what SCO is trying to claim in the first place. Also, the article fails to mention that the "older operating system" Unix is what SCO's primary buisness was based on originally.
Tm
Support TBI Research: http://www.raisinhope.org
IANASB (I am not a stockbroker), but it seems that even shorting SCO is high risk here- the stock will become worthless at some point, but will you actually be able to trade it when that happens? If there's a trading halt (due to an SEC investigation, which in this case looks likely), you won't be able to ditch your shares. They may even liquidate into bankruptcy without giving you a chance to get out at the low price.
What a strange bird is the pelican, his beak can hold more than his belly can.
So, there is/are some large investor(s) that suddenly excersised huge financial instruments, exposing the RBOC to USD$50M in potential losses, should SCOX increase in value?
This is the only rationalle that I can think of, for a big bank to buy SCOX; banks are typically not big risk takers.
I wonder if there is any way to discover who bought "Call" options on SCOX from the Royal Bank? Perhaps some investor whose name starts with M? Maybe it didn't take a rocket scientist corporate finance guy to figure out how to force an "independent" third party to buy a big chunk of SCOX, if you don't want to do it personally...
-- -pjk Perry Kundert perry@kundert.ca http://kundert.2y.net
LOL Joke is on you! People don't know what RBC did by investing into SCO they got close enough to pull the plug on them.
That means that some clienta has made a huge investment in Linux/IBM. So, should SCO win the case, what they loose from that deal they make up by owning 20% of SCO.
Or it's simply a M$ front end.
NO change to the deal with the lawyers. Just don't push the red button (and give away a fifth of the store) without asking the owners first.
Which brings up an interesting question in my mind. If the deal with the lawyers was made by the executives and not the board, is this deal even legal? Was the right to give away a "fifth of the store" even theirs?
If I were an investor in SCO, and this prior deal wasn't disclosed to me, or made subsequent to my investment without my knowledge, I would immediately be on the phone to the SEC.
Don't blame me, I didn't vote for either of them!
The question is, will the US Justice system stand up to Corporate Criminals and toss these thieves in jail for their fraud.
Isnt filing obviously bogus suits, to pump and dump a stock just a little illegal?
BM 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.
SCO had been pressuring the courts to force IBM to reveal its Unix and Linux source code so SCO could prove that IBM was using stolen code. But the judge ruled that SCO would have to present its own Unix source code first and identify which software code had been stolen.
This was a surprise? Are these people paying attention? Do they have any understanding of the law? Do they do any research outside of the SCO press releases?
How long has this issue been discussed on Slashdot and Groklaw? How long has IBM's motion been out? And this is a surprise?
Frankly, the only surprise here is that anyone trusts these bozos with their money.
perhaps it was redhat -
hehe, If SCO wins, so do they!
NO change to the deal with the lawyers. Just don't push the red button (and give away a fifth of the store) without asking the owners first.
Of course, this could turn into a change of deal with the lawyers. Picture this scenario:
1. IBM says "ok, we give up, we'll buy you out at a 30% premium."
2. Lawyers say - "ok, we want 6% of the market cap of the new company."
3. SCO says "please, investors, let us do this".
4. Big investor says to lawyer "settle for 1% or we'll call off the whole deal".
5. Lawyer says "ok, we'll take 1% since it is better than fighting it out in court".
Having absolute veto power means that everyone else is bending over backwards trying to make you happy...
Dear Mr. Pitt:
:8 ,00.as p I have been a SCO
Thank you for your recent correspondence. We at RBC Financial Group
appreciate feedback and welcome the opportunity to address your concerns
about recent reports about RBC's purchase of shares in SCO.
Due to regulatory constraints and issues of client confidentiality, we are
limited to what information may be disclosed in our response. The purchase
of SCO preferred shares for US $30 MM by RBC was disclosed in a routine US
Securities Exchange Commission (SEC) filing and is a matter of public
record. The investment was made to hedge economic exposure resulting from
client related transactions.
Thank you for taking the time to write and for sharing your comments with
us.
RBC Royal Bank
Customer Relations Centre
ORIGINAL MESSAGE:
-----------------
From: richard @pacdat.net
Posted At: 00:58:44.540 10/18/2003
Posted To: RDMNTIBG @rbc.com
Subject: Other
Date : Sat Oct 18 00:52:28 2003
Comments
-------
Please pass this on to the highest level of management. I understand that
the bank has invested money in SCO.
http://www.eweek.com/article2/0,4149,135671
reseller - prior to its sale to Novell I used to work for a company also
owned in part by the Canopy Group I work with the Linux operating system and
am very conversant with the ongoing dispute between SCO and "the rest of the
world" and am of the opinion that SCO's management are doing what they are
doing for personal gain (note the amount of insider trading that has been
done by them in recent weeks) This investment by Royal Bank is one of the
most stupid things I have ever heard of you doing. The tactics being used by
SCO in their quest for publicity (I can't conceive of them actually gaining
anything in the way of licensing and/or penalties from their suits with IBM
and/or SGI and others) are grandstanding of the first order. I have been a
loyal customer of Royal Bank for almost 20 years but am strongly considering
moving my business just over this one stupid act. For my background, please
see: http://richard.pacdat.net richard
--
--
This e-mail may be privileged and/or confidential, and the sender does not waive any related rights and obligations. Any distribution, use or copying of this e-mail or the information it contains by other than an intended recipient is unauthorized. If you received this e-mail in error, please advise me (by return e-mail or otherwise) immediately.
Ce courrier electronique est confidentiel et protege. L'expediteur ne renonce pas aux droits et obligations qui s'y rapportent. Toute diffusion, utilisation ou copie de ce message ou des renseignements qu'il contient par une personne autre que le (les) destinataire(s) designe(s) est interdite. Si vous recevez ce courrier electronique par erreur, veuillez m'en aviser immediatement, par retour de courrier electronique ou par un autre moyen.
=
Been there, done that, paid for the T-shirt
and didn't get it
From finance.yahoo.com
Shares Outstanding:13.85M
Float:7.50M
% Held by Insiders:45.83%
% Held by Institutions:31.82%
Shares Short (as of 10-Nov-03):1.62M
Since the insiders better not be shorting the stock (or uh-oh, SEC) that means over 20% of the available stock IS being shorted.
No, his scenario is you have two fans, one for each team. Each believes in his team and offers 3:1 odds that they will win. So you bet both of them, putting $1 down for their team losing. One team will win, so you lose $1, but one team will win, so you get $3. Assuming you don't get your initial $1 back from the bet you won, your total is -$2 +$3, or $1.
If you were betting on both sides of a 3:1 game against the house and wanted to come out ahead, you would need to ensure you won enough no matter what to cover your loss on the other bet, and make a little extra in at least one of the scenarios. Assuming you do get your initial bet back if you win, let's look at the possible outcomes:
Take the 3:1 odds, bet x -> net ahead 3x if correct, net loss x if wrong.
Give the 3:1 odds, bet y -> net ahead y if correct, net loss 3y if wrong.
So doing both, there are two possible outcomes:
winning taking the 3:1
3x-3y
winning giving the 3:1
y-x
Now, let's assume there exist an x and y for which 3x-3y>0 and y-x>0
y>x
3x>3y -> x>y
Since it cannot be the case that y>x AND x>y, there is no set of two bets x and y you can make on both sides that ensure a profit for you. You can ensure break even, but then there is hardly any point!
The more interesting case is in something like a horse race, for example, where there are many possibilities. It is unlikely the tracks allow any such "guaranteed win" combination of betting, but given that the average track goer is unlikely to be doing matrix algebra and the potential profits from a risker bet will always be higher, perhaps it is not something they've had to worry about. Also, the odds shift in response to ticket sales and the computation and betting would have to be done just before betting closed. Still, fun to think about.
"I object to doing things that computers can do." -- Olin Shivers, lispers.org