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

Pro Sco Slant?

[toadf00t]

Is it just me or does this article seem to have a Pro-Sco slant towards it?

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! :-) (emphasis on surprise)

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.

Groklaw has a good story ..

[leerpm]

going on here.

One user states:

I've always thought there was something fishy about RBC's rold in this. I can tell you such speculative investments are way out of character for a Canadian bank. Even if the money comes from the New York office of their brokerage/investment bank arm. When the deal was first announced, RBC refused comment saying they never comment on client affairs. That cryptic response caused some questions as the relationship with SCO didn't look like a bank/client relationship. An SEC filing in November indicated that the $30 million was RBC's money and did not belong to anyone else. It also indicated that RBC did not intend to sell its shares and had no prior arrangement to sell them.

Now another cryptic statement. I've felt (with no evidence) that RBC was indeed up to something. But what? My best guess is that they have used their own money, and are not holding the shares for anyone else. And that they have an agreement with a third party about the disposition of any profit or loss from the deal. The logical arrangement would be that RBC puts up the money and gets to keep any profits. But the third party would compensate them for any loss. Thus the investment is clean, and the third party gets to funnel cash to SCO without disclosing their involvement.

For the record, I have no idea who such a third party might be. I don't think it would be Microsoft. They have lots of money marching in the front door. Why would they need to sneak money in the back? But that doesn't leave any other likely suspects. Its possible that one of the other big propriatory software companies, like Adobe, could be behind it. We may never know.

recently famous for Enron involvement, too

[Anonymous Coward]

did anybody else notice the other reason RBC has
been in the news

http://www.cfo.com/article/1,5309,11460,00.html? f= features

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.

Re:They aren't altering the deal.

[Brandybuck]

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.