Royal Bank of Canada Cashes Out of SCO; SCO Begins Layoffs

jbell99999 is the first one to submit news that the Royal Bank of Canada is divesting itself of SCO stock. They're selling part of their preferred stock to Baystar, which has already indicated that they want to redeem their shares, and converting the rest to regular stock, which they can presumably sell on the open market. In other SCO news, Versicherung writes "The Santa Cruz Sentinel is reporting, SCO is laying off 10 percent of its worldwide workforce. The cuts come less than a month after the company brought on a new chief financial officer and just before the company ended its second fiscal quarter April 30." See also stories at Eweek and Linuxinsider.com.

Comments

Where have you been?

[Anonymous Coward]

"Begins layoffs"? Where have you been, SCO has been laying off staff for months now.

In Santa Cruz, for example, they sliced their tech staff by like 80% or something.

Not a Good Stock to Own

[jcrash]

Ouch - currently, 50% of the total float of SCOX (the SCO Stock) is shorted.

So, for every person betting it is going to go up, there is someone betting it will go down.

Re:Not a Good Stock to Own

[Jonboy X]

The scary thing about that statistic is the idea of a short squeeze. Basically, that means that if the price rises a bit, maybe some people are forced to buy back the stock, 'cuz they don't have enough money in their margin account to cover the stock's value anymore. This buy bumps the price some more, and now the next guy has to cover. It's hardly ever an issue, but 50% short interest is pretty much unheard of.

Of course, for this to happen, the stock price would actually have to go *up* first...

Re:Not a Good Stock to Own

[jjo]

Not only that, but the short ratio is almost 14 days. That means that if everyone else stopped buying, and all the shorts started buying to cover their positions, it would take two weeks of normal trading volume to cover them all. We still may see someone try a short squeeze.

Aside from that, it seems that the only reason that people are still holding SCOX is to get some more money out of whoever has been manipulating the stock price for the past year. That's the only explanation I can see for SCOX not being the penny stock it was (and will be again).

Heh.. Play with fire.. Get burned

[Anonymous Coward]

"The Series A-1 stock was purchased at a price of $1,000 per share, and will be converted to common stock based on a conversion price of $13.50 per share." Now.. I'm a stock market clod.. SCOX is currently trading at 6.. It's already lost 58ish percent. At least BayStar knows that the loss is covered.

Bert Young

[Jonboy X]

Just so ya know, Bert Young has a experience in helping companies that are basically dead in the water keep up the illusion of growth right up to the moment of reckoning. The GL has a story on it here.

Re:Bert Young

[Zocalo]

That old Groklaw stuff is nothing, trust me. Check out Mr. Young's track record before marchFirst for even more revelations in this post at the Yahoo Finance board. Connections to MLM schemes, the mob, Adnan Kashoggi of Iran-Contra fame... Oh Boy!

10% is nothing...

[taped2thedesk]

...compared to the past year:

From SCO.com:
Q. How many people does The SCO Group employ? A. As of April 30, 2003, 339 employees.

From the article:
Stowell said the cuts totaled less than 10 percent of the company's total worldwide work force of 275. There were cuts, however, earlier in the quarter as well. In March the company reported 305 employees, including 73 in Santa Cruz.

339 - 275 = 64 positions gone from April 2003 to May 2004, not including these layoffs. Jeez.

Well...

[QuasiCoLtd]

According to Zdnet those being laid off are mostly in the engineering, marketing, and sales depatments. This is very telling for a so-called "tech" company to lay-off those responsible for creating and selling your core product. Of course we all know that SCO is a litigation company and has no need for engineers to improve a product, no marketers to hype the non-existant product, and no salesmen to.... well you get the idea.

Naturally, Slashdot get's it WRONG.

[Saeed al-Sahaf]

Good Lord. RBC is not divesting itself of SCO stock. They are converting preferred to common. Whole different thing.

Re:Naturally, Slashdot get's it WRONG.

[MyHair]

They are converting 1/3 of their preferred stock at an enormous loss (13.50 vs. curent price 5.94) and selling 2/3.

The prevailing presumption is that they sold the 2/3 at a loss and will strategically dump the common stock. Keeping the common stock after a move like this wouldn't seem to make sense, but there is probably more going on than any of us know.

So they divested 2/3 of their stock for unknown terms, lost some benefits of the PIPE deal and are holding 1/3 of their original investment at >50% loss over 7 months. They presumably had the option to force redemption like Baystar, and being the majority investor would get their slice of the pie first. Instead they wait to weeks and pull this. Sounds like they're cutting their losses and splitting to me.

But admittedly that's not certain yet.

My best guess is that RBC prefered cutting losses and dropping SCOX rather than fighting about redemption, while Baystar has committed to redemption or bullying, and doubling their stock holdings for presumably a nice discount increases their leverage against SCO management and increases their redemption penalty should they win.

RBC folded, Baystar raised, and SCO is "all in".

Re:Thank "The Doors."..

[Anonymous Coward]

sandbender n. [IBM] A person involved with silicon lithography and the physical design of chips. Compare ironmonger, polygon pusher.