SCO and Baystar Strike a Deal

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SCO and Baystar Strike a Deal

Posted by michael on Tuesday June 1, 2004 @10:47AM from the know-when-to-fold-em dept.

comforteagle writes "As you'll no doubt recall, SCO financier wanted to cash-in on its stock because of how SCO was being run. It appears they've struck a deal. 'The SCO Group, Inc. today announced it has entered into an agreement with BayStar Capital II LP to repurchase and retire all 40,000 shares of Series A-1 Convertible Preferred Stock currently held by BayStar.'" Summary: Baystar and the Royal Bank of Canada invested $50 million in SCO in October 2003. In 6 1/2 months, they've now converted their investment to $13 million in cash and $13.7 million of common stock, for a loss of almost half their investment.

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Ha ha! by BWJones · 2004-06-01 10:48 · Score: 5, Insightful

In 6 1/2 months, they've now converted their investment to $13 million in cash and $13.7 million of common stock, for a loss of almost half their investment.

Nelson: Ha ha!

Seriously though. This should be a lesson to VC funds and financing operations that finance companies whose business models are built upon legal action and sucking off the hard work and sweat of people who make ideas work through the creation of products that improve our lives. These companies based on litigious action are typically fairly sleazy operations and will not generate any "good will" for the financing operations or companies.

I personally would much rather support and fund (and yes, even make money from) companies who are out there to make a difference. Work to make something new or make a difference rather than prostituting yourself for mere money and parasitizing off of others hard work and insight.

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1. Re:Ha ha! by GPLDAN · 2004-06-01 10:55 · Score: 4, Insightful
  
  I agree that SHOULD be the lesson. Yet, Baystar reps constantly repeated the mantra that the litigation was not being focused on properly.
  
  I'm afraid that that the Baystars of the word learn, is to properly evaluate the IP case before funding it. In fact, a whole cottage industry is there for the plucking. Law firms that SPECIALIZE in consulting with investment firms, to determine if the IP case has merit. "Looking to invest in that no name company that has a submarine patent? Hey, talk to us first! We'll let you know if they have any chance of winning! Our lawyers only run $200/hr!"
2. Re:Ha ha! by ThisIsFred · 2004-06-01 14:12 · Score: 4, Insightful
  
  Yeah, Microsoft. Hmm. Stallman's ideas were equally brilliant and changed the computing landscape in a profound way (you can argue good or bad, just like with Microsoft). But Stallman doesn't live in a 68 billion dollar robo-house, so his ideas aren't interesting to the general public.
  
  --
  Fred
  
  "A fool and his freedom are soon parted"
  -RMS
3. Re:Ha ha! by hopethishelps · 2004-06-01 19:22 · Score: 5, Insightful
  
  i run back to enjoy my commodity hardware...i guess i have to thank windows for that
  
  Absolutely not.
  
  The concept of the personal computer was popularized by Apple with the "Apple ][" and Dan Bricklin's spreadsheet, Visicalc. For the open architecture PC, we have to thank IBM and the companies who figured out how to write a legal BIOS: Compaq and Phoenix. IBM later tried to close the architecture by introducing a patented I/O bus, and we have to thank a group of PC makers, led by Compaq, who had the collective balls to stand up to IBM in the marketplace. That's what, and who, gave us the commodity open-architecture PC.
  All this happened before Windows had any significance. Windows had little market share before version 3.0 came out.
4. Re:Ha ha! by CTachyon · 2004-06-02 00:59 · Score: 4, Insightful
  
  What about MS DOS?
  
  Prior to 3.3, MS-DOS was incompatible with itself, much less killer apps. I mean, one of the big new features of 2.0 was *directories*, fercrissake. It's more fair to say that the PC became popular in spite of MS-DOS, rather than because of it.
  
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some is better than none by lawngnome · 2004-06-01 10:49 · Score: 5, Insightful

Getting some of their money is better than losing it all when sco gets their ass handed to them.
Next time I would suggest in doing more research...
A hole below the waterline by Anonymous Coward · 2004-06-01 10:50 · Score: 4, Insightful

Even the rats that funded this FUD operation see the handwriting on the wall. Half their cash is better than none....
Somehow by FS1 · 2004-06-01 10:54 · Score: 5, Insightful

I would call this poetic justice, but since we all know the money came from microsoft originally. A loss of about 24 million dollars is nothing to them.

What is really sad here is that people who could do something about activities like this Baystar/SCO/Linux/Microsoft/Sun/IBM/etc debacle don't care.

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Re:So... by k98sven · 2004-06-01 11:14 · Score: 4, Insightful

No. It was a $50 million dollar cash investment for new SCO stock.
That means $50 million cash for SCO, and $50 million worth of SCO's stock.
(AKA 'Reichsmarks', 'Confederate dollars', )

Then it turned out that noone else felt that $50 million dollars of this SCO-money was actually worth $50 million. So they wanted their money back.

They got $13 million. And some stock. The stock doesn't cost SCO anything.

So SCO gets 50-13 = $37 million out of the deal. Not bad. But, they have totally screwed their reptutation with any potential investors.

Now given that SCO:

Is not going to win any of their lawsuits

Their Unix business is losing money big time, and they have nothing to attract new business with, being generally dispised.

They have no way of getting more funding from investors.

They're sinking. Big time. However, Microsoft may very well pitch in to keep them afloat through the lawsuits.
Re:You think it's funny, but actually ... by GigsVT · 2004-06-01 11:27 · Score: 5, Insightful

It's not screwing anyone. It's a standard hedge. It reduces the holders profit potential, but it lessens risk since it basically locks in the shares at the short price.

The only way you could ever consider this screwing anyone is when SCO initially issued the convertibles... convertible debentures and convertible preferred and the like dilute the stock, the same as any other stock issue, it's just that convertibles dilute the stock in ways that might be subtle for the beginning investor. (The dilution isn't immediate).

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SubGenius fodder for sure by Weaselmancer · 2004-06-01 11:28 · Score: 5, Insightful

You know the joke about the whole SubGenius thing..."If you're so smart, why aren't you rich?"

Here is a prime example of why we are all SubGenii. We all knew that SCO would tank. We had a golden opportunity to make some serious cash. And you know what? I'll betcha not a single person on all of Slashdot cashed in on these fools. Damn.

It's not often you have a sure thing in a horse race. And I just missed mine. Double damn.

Weaselmancer

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Weaselmancer
rediculous.
1. Re:SubGenius fodder for sure by Anonymous Coward · 2004-06-01 11:36 · Score: 5, Insightful
  
  Shorting is a big risk. When you buy a stock your potential losses are limited to your initial investment. When you short a stock your potential losses are unlimited. This is why I did not short SCOX, I was afraid someone like MS would buy them out, and then I'de be screwed. There is no such thing as a sure thing.