Slashdot Mirror
SCO - What have WE Forgotten?
"Over the last eight months I have read countless posts on Slashdot regarding SCO and most if not all of the posts view the scene with rose-tinted spectacles. Promises are made that SCO will be buried and that McBride will find himself in prison, yet they are still there and McBride is still in charge. The men and women who play the stock market on a regular basis are no fools and something unknown to Slashdot readers made the SCO stock price rise by 2.4%, on December 26th, over half a days trading. If someone buys a stock they expect the price to rise, so what have WE forgotten that could be good news for SCO investors? The principle of 'many eyes' has been used by the Open Source movement before. Thousands of people examine source code, submit patches, and ensure that we give the best software we can to the community at large. Bugs are announced and fixed within hours and all of us know that this methodology provides a better solution than that offered by closed source products. We now need to apply the same methodology to the SCO problem, all of us need to consider what we know about this sorry affair and how we can legally contribute to the downfall of the SCO Group.
SCO have been ordered to produce their evidence against IBM by midnight on January 11th, 2004. This gives us [five days] to make sure that when the IBM lawyer marches into court he has a spring in his step, knowing that he has every Linux user on the planet behind him. THEN we can talk about SCO being buried, but not before.
Thank you for your time and a Happy New Year."
I personally find it hard to believe that there are NO skeletons in the Linux kernel closet. That is perhaps one of the advantages of closed source. Deeper closets...
You're assuming that stock prices reflect the "value" of a company - they don't. Investors aren't often all that smart and a bit of media buzz is often enough to make them invest. Media buzz != sound financial investment.
The fact that SCO is listing higher is an indictment on the mentality of investors not a reflection of the soundness of their legal case.
It doesn't mean anybody has 'missed' anything, just that the people that invest in SCO are not doing so based on the technical or legal merits of its lawsuit.
When we remember we are all mad, the mysteries disappear and life stands explained.
Mark Twain
In many cases (especially with tech stocks), stock price has *nothing* to do with how well or badly a company is doing. In fact, if a company gets a lot of press, which SCO has, it often causes a lot of people to buy the stock, which in turn causes the stock price to go up. Was there really any good reason to be investing in the company? Probably not. Another example of an over-inflated tech stock, that will probably crash like so many other have.
The question is; do you want to feel good about yourself or worship at the alter of Mammon. If the soul purpose of ones life is to die with as much money as possible then perhaps one may regret not buying SCO stock. But consider all the honest companies that may be lacking investment due to this anomaly.
This is not strictly speaking a pump and dump. I call what SCO is doing "pump and squeeze". SCO is very thinly traded. That means most shares of SCOX are held by insiders and institutional funds. Only a small amount of stock is being sold on the open market. Small buys and sells of the stock move its price wildly. This means SCO can't just dump their shares on the market and make a killing. The price would drop too rapidly for them to move it all at a good price. What insiders can do is register planned sales of stock with the SEC and time their press releases to shortly proceed those sales. This allows them move chunks of stock at the high rate. Anytime the price dips too low for public consumption or a planned sale, they can make another outrageous announcement and pump it back up. The longer they have to unload their stock, the better this works. This is why they do everything humanly possible to delay the IBM and RedHat suits. Either one of those coming to a quick finish would destroy the pump before it finishes extracting money from the market.
They can also use the paper value of the stock as collateral to buy things. This seemed to work best by their buying Vultus (another Canopy Group company). In this way, they can allow the Canopy Group to show real profits with real money even though its really the Canopy Group shuffling things around. It would be risky for them to acquire outside companies this way since it would expose their scheme to more parties who either want their cut or sue them as well.
I think the core of the question is not stock value, but is there something about the overall situation that we are missing. Is there something that we are overlooking that might lead to a "gotcha" by McBride and crew that we can prevent now.
That is a question well worth pondering.
The simple truth is that interstellar distances will not fit into the human imagination
- Douglas Adams
(You don't have make it your sole purpose in life, but could you at least sacrifice a rubber chicken upon the altar of literacy?)
Spelling flame aside, I pay frequent homage and occasional tribute to Mammon. He's a lesser god, but his temple is always a hive of excitement. And it's from that perspective that I'm speaking.
I don't regret not buying SCO. The investment premise is that there's a one-in-ten chance that they'll be able to slip this scam past a judge, and sock IBM to the tune of ONE... BILLION... DOLLARS. (Or that IBM will simply buy the entire company for $500M to prevent the scam from working.)
That's it. If you buy SCOX, you're buying a lottery ticket. A hedge against fraud and stupidity, as it were -- if these dirtballs manage to make their scam work, it's the end of Linux and a very bad omen for the rest of the technology industry. If you're heavily invested in RHAT and NOVL, for instance, you might want to own some SCOX on the off chance that the judge falls for the scam and lets Darl wipe Linux off the face of the earth.
Had SCOX been optionable, I'd have bought put options, several months ago, and every one of those options would have expired worthless, because the scam has lasted a lot longer than I thought it would. But of course, going net short SCOX is just as much a speculation on a judge's ruling as going long SCOX.
The reason I didn't buy or attempt to short SCOX has nothing to do with a hedge against stupidity or speculating that the scam will eventually be unwound and Darl will finally get his much-deserved perp walk.
It's because I don't play the lottery. Either way. There are good and bad companies out there that are undervalued. Buy those. There are good and crappy companies out there that are wildly overvalued. Don't buy those.
SCOX is a crappy company for which there's no way to know whether it's undervalued or overvalued. The risk of going long or short do not justify the rewards.
My position on the behavior of The SCO Group is that they're a bunch of lying fuckweasels who deserve nothing less than a forcible sodomization with a diamond-grit-encrusted Louisville Slugger wielded by SEC Chairman Bill Donaldson himself. But so long as the stock's valuation is dependent upon the presence or absence of Clue Receptors in the neural pathways of a single human being, I have (and will take) no position in SCOX stock.
SCO is a catch phrase outside of tech circles. I literally had to tackle my mother to prevent her from investing. She argued about them being in the press and once the lawsuit was settled the advice she was getting was they'd triple in value. After shedding some light on the grounds of the lawsuit and how I felt about the facts of the case she understood why I freaked out. But then again, just because thats how I feel doesn't mean the judge/jury won't find in their behalf.
I'm not claiming to have any more information then any other casual observer to all this, but to answer the question of why is the stock price rising?, in my mother's case, its because some dumbass calling himself a stock trader said there was a buzz and is forcasting the stock going through the roof after they win some lawsuit they're part of.
Let's take a different approach and assume that if SCO wins its case, everybody will stop using Linux. At that point, SCO will be worth its cash on hand. Ignoring whatever it needs to shell out to lawyers and Satan, $3B in cash would give a $3B book value and a $3B market cap since they would have no revenue. In that case, their current market cap is 1/12 of that, so the market is giving them a 1/12 chance of winning. That's a lot better than the 0.005 probability, but I still feel much better being on the 11/12 side.
Disclaimer: this are back-of-the envelope calculations. Please do your own math before drawing any conclusions and please share the results here.
As someone who has worked in the investment industry for almost 6 years, I have to agree with Koreth on this. A rise in stock price means absolutely nothing. The line traders no little or nothing about Linux, SCO or the dispute. They know what they read in the papers, what the read from Bloomberg, and what analysts say.
;-)
Recent news tells us that all of these people can and are wrong sometimes. The fines imposed on the likes of Merrill Lynch and JP Morgan should tell use wonders.
Personally, I'm waiting to see if SCO can produce anything substantial in court, which is where they will live and die with this. Here's my prediction: If SCO cannot produce any substantial evidence to their claims, the price will drop to the sub-$.25 level faster than Bill Clinton's trousers with an intern.
It's 11PM, do you know where your pants are?
That may or may not be so. Analysts also sometimes lie, as the New York Attorney General recently demonstrated in a successful court case. I won't speculate on whether it's more of a case of ignorance, lying, or a cynical evaluation of the ignorance of the market on the part of certain investors, that has been driving up the price in this case.
SCO might be a bubble, but with the attention it draws, it also has a very solid chance of not being a bubble.
Let's apply Occam's Razor here: I move that they are getting lots of attention because (a) they are sqwarking a lot; (b) they are scaring some Fortune 500 companies, at least temporarily until the CxOs talk to their legal advisors; (c) there is a lot of money and a catastophic harm to the Linux market puportedly at stake here, if you believe SCO.
Attention does not imply correctness. Popularity does not imply correctness.
The GPL has never been tested in court, I haven't seen anything indicating that this is 100% reliable.
Well, admittedly there is a flaky argument prevalent on Slashdot and Groklaw. The arguments runs that if the GPL were "invalidated" it would revert to "no rights to copy", which would kill SCO in punitive damages. Not necessarily. Another possibility is that the court might try to find the "nearest charitable purpose" that is similar to the spirit of the GPL but doesn't break the law.
So that counter-argument doesn't really work. But the problem with your argument is more fundamental. In order to talk about this sensibly we have to speculate on what precisely the judge might try to strike down. No-one, to my knowledge, has put forward a good argument for why any law or constitutional amendment would invalidate any aspect of the GPL - least of all SCO.
Granted, the least popular aspect of the GPL is the copyleft idea. But it is a completely logical fallacy to argue that because it is unpopular with some, then it is somehow legally dubious. Yes, it is perhaps the most likely aspect for SCO to attack. But without a visible chink in the armour, why should we worry?
I think the onus is on you to suggest an actual argument for why the GPL might fail in court.
There are good reasons why they wouldn't release this code. If they did, the Linux community would make sure that the offending code wasn't in the next kernal release (which would probably be all of a week in coming) and then SCO could only go after users for past use of their code. That wouldn't generate anywhere near the revenue that they will if they can catch the Linux community cold and then force you to pay them or abandon your IT infrastructure until a patch comes out. That's much more enforcable as well.
Note that SCO (both predecessors in interest, old SCO and Caldera) has contributed to Linux massively, and even sold it, and continued to offer it for months after evidence of infringement was allegedly discovered. So what we have here is a company spending years giving out its own product for free and misleadingly giving the impression - in a very clear license, the GPL! - that the product being given out is unencumbered in all relevant respects. Even if SCO could persuade a judge that the infringements were not noticed due to gross incompetence on SCO's part, any reasonable judge would give all parties a reasonable grace period to wait for the patch to come out and apply it.
And the law (and IBM's contract with SCO, incidentally) obliges SCO to reveal what code is infringing before it can claim damages. Damages incurred by users prior to that time are innocent infringements, and although they may be technically liable, would any judge in the land award SCO money based on its own failure to mitigate the alleged damages? No, it would not. There is no successful precedent that I have heard of for such abusive rent-seeking towards innocent third-
Female Prison Rape in NY
Ok, I am assuming that you are trying to indicate whay institutional bankers are still investing in SCO, just as Bank of America, et al. were doing with Parmalat up until very recently. But this viewpoint overlooks a large number of issues that I don't see an institutional banker with ANY legal screening missing (you do legal screening of these claims, right?). OK, even without legal screening, some analysts have been saying some interesting things about SCO. IANAL, however, though I read court cases as a hobby.
The first is that the GPL being tested in court doesn't do a darn thing for SCO. Either they lose (and probably go out of business), or they win and face massive lawsuits by Linux kernel developers over copyright infringement. Yes, without the permission from the GPL, it is SCO who is infringing on copyrights not only by IBM and Red Hat, but also Linus Torvalds and THOUSANDS of other contributors.
Secondly, analyists HAVE been saying that these lawsuits undermine SCO's former core competency as a software manufacturer.
Laura DiDio aside, I think analyst reaction to SCOG has NOT been as positive as you make it out to be. And Laura DiDio has claimed that the lack of indemnification is what holds Linux up in the enterprise while failing to mention that no other enterprise OS offers such indemnification. Interestingly Linux as offered by HP now does which should by that measure give them a strong advantage in the marketplace.
Third, SCO did not fare well in the last round of hearings. I have generally used pretrial hearings as a general test of how the judge views issues at hand, and the judge has not reacted well to what IBM has argued are sets of delaying tactics and discovery requests without specific allegations of wrongdoing (i.e. fishing for evidence). SCO will have had 7 months to prepare their response to the discovery request in January, and it will be interesting to see what they do or don't put forth.
Finally, the fact that SCOG was an active contributor and distributor (even after the lawsuit was filed!), they cannot argue that they inadvertantly distributed their trade secrets under the GPL. No one believes that.
SCO IS A BUBBLE. And the SEC is now investigating three banks in conjunction with their handling of Parmalat (including Deutchebank and Bank of America). SCO may be next.
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