BayStar Interviewed Regarding SCO Investment

Gonzo_Warrior writes "BayStar's managing partner explains what led him to 'ask' SCO for their money back. In this article, Lawrence Goldfarb describes '...the wayward corporate behavior on SCO's part' that led him to reevaluate BayStar's position. In a letter to SCO last week, BayStar claimed that '...SCO's behavior violated provisions of the investment agreement and that BayStar's convertible preferred stock be redeemed.' The article notes that since its founding in 1998, BayStar has never before asked a company for its money back." CNet has a story based on talking to a BayStar spokesdrone.

Comments

I don't get it.

[Anonymous Coward]

SCO's stock price, which fell 38 cents yesterday to $6.80 a share, has dropped 30 percent since last Thursday, the day BayStar sent its redemption letter.

.. but now it's at 7.96. That's why I'm a geek and not a Wall Street suit, I can't see any logic in the stock market. Isn't this NYTimes article more bad news for SCO?

Re:I don't get it.

[avkillick]

Actually good news for SCO. THe first indication that Baystar may actually back off on it's threat/request in exchange for for changes in the way SCO does business.

Re:I don't get it.

[vondo]

Not really. All the article says is that Baystar is unhappy with how SCO has been acting in public. And we all *know* how they've been acting in public. This could be a sigh of relief. Investor's might have been worried that Baystar concluded SCO's case had no merit. That would have been bad for their investors.

On the other hand, Baystar doesn't have their money yet, and if they came out and said "SCO's case has no merit" the stock might tank to the point where they couldn't get it. (SCO's market cap is ~$100M, Baystar is asking for 20% of that back in cash.)

Re:I don't get it.

[Zocalo]

Relax, this is just a rally on an overall downward trend - they are still doomed. What happens is that investors think the worst is over following bad news and buy back-in; they'll dump again on the next set of bad news - SCOX has another financial coming up, and there are show and tell dates in the IBM case looming too. Then there are people who need to buy stock to cover shorts; the higher the stock goes the less they make. There's lots more insight into this kind of thing from Melanie Hollands of IT Manager's Journal right here if you are interested.

Re:I don't get it.

[meringuoid]

A large proportion of the SCO stock is shorted. What this means is that people borrow shares in SCO and sell them. Later, when SCO's stock value has dropped, they buy back those shares to return them to whoever they borrowed from in the first place.

It could well be that SCO has dropped far enough that a lot of these people are buying - taking the profit on their short sells. That would produce an upward trend.

But then IANAStockmarketGuy. All I know about this sort of stuff I learned from SCO :-)

Baystar may want to fire Darl

[jaymzter]

More on this at Groklaw and the Mercury News

"BayStar Capital Management LLC believes SCO needs to hire executives with more savvy about intellectual property cases and spend less money on its Unix products, BayStar spokesman Bob McGrath said Wednesday."

"SCO's chief executive is Darl McBride, whose cash compensation totaled $986,047 in the company's fiscal year ending last October. That pay package troubled BayStar, McGrath said, given SCO's small size - the company has annual revenue of $79 million and about 300 employees."

Baystar may finally be the one's to shut oldSCO's mouth for us so that IBM can finish the execution cleanly

Yahoo Link

[Archangel Michael]

http://finance.yahoo.com/q/ecn?s=SCOX

This one shows the standing orders for buys and sells, which if you do a comparison, shows possible daily trend. More Sell orders can mean declining price. Also look for the variation of prices between the sell and buy sides. A huge descrepancy can mean valuation problems within the market.

Finger pointing

[Lord Grey]

From the article:

Microsoft initially recommended that BayStar take a look at SCO. But there is nothing unusual about that, Mr. Goldfarb [managing partner of BayStar] said. BayStar often talks to the investment and venture arms of major technology companies like Microsoft, Intel and Cisco. "It was evident that Microsoft had an agenda," Mr. Goldfarb said.

Does anyone remember the leaked memo that pointed to Microsoft's interest in the BayStar investment? Many people in that thread guessed that perhaps Paul Allen arranged the deal on the golf course or over the weekend or something. Apparently, that point is moot. BayStar and SCO both knew who was behind it.

What about the statement from Blake Stowell of SCO that, "Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the BayStar transaction."?

Now, who needs a tin-foil hat?

What's more interesting is....

[Excelsior]

More interesting is the article over at ZDNet. In that article, Baystar contends that Darl should step down, and that SCO is wasting it's time with the Unix business. Baystar suggests that SCO make litigation its only business.

Re:Since 1998 eh?

[mccalli]

So while the history isn't exactly epic there is enough to show that, to date, they have resorted to this sort of action in fewer than one quarter of one percent (.25%) of cases. This strikes me as fairly significant.

And me also, but for different reasons. I've been in the financial services industry since before this company was founded, and I've never heard of a comparable case. The moral to me is to distrust Baystar as a potential investment partner.

Cheers,
Ian

BayStar *wants* SCO to be a lawsuit mill...

[OmniGeek]

BayStar doesn't see the SCO UNIX business as viable (no surprise there), and wants SCO to become an IP lawsuit mill. Wazzup with that? There's *no chance* SCO can survive that way, 'cause they don't HAVE the IP to win their current cases, let alone any new ones. So either:

1) BayStar got into this "sure thing" by bad judgement, is blowing smoke about their present motivations, and actually want some money out now, quick, before "the plane hits the terrain", or

2) BayStar is shilling for soMeone elSe and doesn't give a soaring adlunar coition about SCO's prospects for survival or monetary return, or

3) they are in some altered reality where they still think SCO *can* win. In that case I don't want any of what they're smoking, it impairs judgement too much.

Invest more? Baystar wants them to stop

[burgburgburg]

investing in UNIX completely. Since Baystar's investment can only make them money if SCO wins the IBM lawsuit, this makes sense. Spending time on an actual product, building a good relationship for longtime company growth, etc. won't make them a dime. As far as they're concerned, it's wasted money.

Already discounted information

[mdfst13]

Since it has been known for a while that their products are crap, it doesn't make much difference if someone says it. However, if Baystar sticks to the money back demand, it bankrupts SCO, making the stock worthless.

Some people still believe that there is a possibility that the lawsuits may bring in money. A bankruptcy precludes that (even if the lawsuits continue under a new owner, the money won't go to the stockholders). Thus, Baystar not forcing them into bankruptcy is good for SCO stock.

Which should we find more convincing: where Baystar put their money (if they remove the money back demand, they are indicating that they think they will get more money if they wait, i.e. that SCO will be more valuable after the lawsuits); or what they say (that SCO has crappy products).

Yes, we have now gotten to the point where the comment, "your products are crap, just stick to suing people," actually is a rosy view of SCO's future. No one believes in their products. At least some people still believe in their lawsuits. SCO is no longer a tech company. They are just a bundle of lawsuits hoping that one will carry through to a big reward from the deep pockets of IBM, Daimler Chrysler, or AutoZone.