Slashdot Mirror
SCO and Baystar Strike a Deal
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 $13.7 million of common stock, for a loss of almost half their investment.
Might as well have bought a bond.
Since it's SCO, it would have been a junk bond.
26M$ is still much better then what it would be in four to eight weeks time
This is really going to hurt SCO, really going to put a large dent in their legal warchest. Let's say SCO does run out of money and they are forced to drop their suits...what happens when someone else purchases their "patents" and starts the whole thing over again (hi, Microsoft)? I'd almost rather SCO see this to the end, as it appears that they have a penchant for shooting themselves in the foot.
Their (even bigger) loss.
AC comments get piped to
Quoth the article:
Now if they're so happy, why are they buying their shares back?
A fool and his financiers are soon parted.
It's been fun watching the SCOX hover around the $5 mark. I only hope they stay alive long enough for IBM and Redhat to be able to drive the stake through their undead hearts.
Now for the REAL question - with evidence that Microsoft was behind the feeding of SCO, will the DoJ find the balls to actually investigate? Perhaps if the SEC launches action against the SCOzos...
Would this be seen as profit for SCO? I'd hate to see them have more funding for the FUD campaign from hell.
My personality is like a coupon, it's 10% off.
Baystar investment managers have left Baystar "to pursue other opportunities." These include, running technology funds for Mutual Fund companies!
Gotta love the way the ol boy network functions in the financial sector. Just give your classmate from Yale a call, and boom - you are off to lose more money for other people...
Financial analysts need permanent records. I need to be able to Google the guy running a fund, and have it say "this moron thought SCO was a good idea in 2003."
will not pay the bills. I do not trust the entire banking/investing community any more at all, I think we'd be better off NOT having these so-called "investor class" sucking off the hard work of everybody else. Bunch of parasites that need to get back to work.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
Any takers?
===== Murphy's Law is recursive. =====
This reminds me alot of Junk Bond trading from what I remember of reading in the newspapers (remember those things...newspapers that is...well, soon SCO too) at the time.
With what the remainder of the stock is selling for now and considering outside held debt, this would not be a good time to invest in SCO
I have a theory that the truth is never told during the nine-to-five hours. -- Hunter S. Thompson
... on how long it takes Baystar to come out and say that SCO is talking shit and something much, much worse is happening from SCO's end than they're letting on to. Like Baystar starting a lawsuit or something.
Seriously... I wouldn't put it past them.
Alito: A vote for Alito is a punch in the eye to put that bitch back in her place!
I hope you're not a stockbroker - the link you have given is for the Speedus Corporation. Try looking at The SCO Group.
According to this site, the changes in the stock price have been: (-57.4% - last 3 months, -70.0% - last 6 months, -22.5% - last 12 months)
And analysts still recommend it as a "strong buy".
Why should they care? VCs expect to lose about 85% of everything they invest -- that's the level of risk they take. They make so much back on the other 15% that it's worth it to them.
This is why they're not really bothered about due diligence, and why they aren't interested in ways of reducing that 85% -- it's chickenfeed compared to the profits on the other 15%.
Yes, that's "Banker" spelled with a "W"...
From the PR:
If Baystar is lucky, right now that's about 250,000 shares a day average, or 25,000 shares a day that they can sell.But, let's assume that they can get the sales up to 500,000 shares a day average, letting them sell 50,000 a day. With 2,846,004 shares to be sold, that means that Baystar, if they sold every day, would need 57 market days (about 11 1/2 weeks) to sell out... with 25,000 a day, you of course double that. This means that, if they could start selling next Monday, Baystar would be out of the stock around the First of September (around Thanksgiving if they sell at 25,000/day)
Poor Baystar....
NOT!
We are the Music Makers, and We are the Dreamers of Dreams...
Doh! I read the wrong number from the press release. Baystart actually got 2,105,263 shares of common stock in the exchange.
That's 72 trading days (or 14 calendar weeks) to sell the entire amount, at the current average volume.
Now SCO has $13 million LESS to harass people with. This shortens their lifespan considerably.
Not to mention, they are unlikely to get ANY further investment...
I think, with the inevitability of certain doom, even imminent, Canopy does what Canopy does best:
Funnel the remaining cash into their own pockets and lets the SCaldera shell die.
This is what they've done time and time again. Think Caldera got the money from their DR-DOS lawsuit?
Nope. Canopy did. They formed a new Caldera corp, moved it's operations there and continued the lawsuit with the shell of the original corp.
Anyone investing in SCaldera should remember that...
Corporatism != Free Market
There's an interesting interview with Darl at The SCO 2004 forum
Darl: I was trying to explain this to my father the other day. We grew up on a ranch, and he was asking the question "What was up with all the lawsuits - sounds very complicated?"
"Well, it's quite simple, it's like our days growing up on the ranch If you took the cattle up on the mountains in the Summer-time, and in the fall, you went to round them up, you had to bring the cattle back in, and whenever they had a brand on their side, you could establish which brands were yours. In the meantime, if somebody came and took your cattle, you had the rights to go track them down. When I was growing up we had a case very similar to this. Someone stole our cattle, we went and found our brands. The Brand inspector helped us get restoration of those cows back to us, and we were whole again with our property. That's exactly what's going here. Copyrights of software are very similar to brands on cattle. And what we're doing is we've found that the copyright [works] we have here have made their way into other properties. We're in the process of rounding these up, and once we have them rounded up, then we will feel that we have restitution and justice, for our intellectual properties demands that we have out there."
Well, if he'd tell us what his brand looked like, we could return the lines of source code to him. Unfortunately, until we know what his brand looks like, these could be the stolen lines of SCO UNIX for all we know:
Vintage computer adverts: http://www.vintageadbrowser.com/computers-and-software-ads
I don't do shorts, and I couldn't find any way to buy a put option against SCOX. I still think they're downward-bound, is there any way to make money on it with reasonably limited risk?
That means that Microsoft now owes Baystar something in excess of $50 million - $13 million = $37 million and $50 million - $26.7 million = $23.3 million.
The former is more realistic, and Baystar execs deserve something for their willingness to play the fool. So, in the next year or two look for Microsoft to do something that'll net Baystar a quick and easy $50 million in profit.
Am I being cynical or conspiratorial? I think not. Just realistic.
Mike Perry, Inkling blog , Seattle
I bought at 5 and sold at 10... never dreamed it would go to 20, I mean seriously... who thought there were that many silly people in the market.
I felt sure that there were enough silly people to push it to 10 tho.
Didn't have the balls to play on the short side, because I can't tell who all is in that bed... so, I couldn't really tell how long the ride was gonna last.
And, I'm still not rich. But... it didn't hurt.
--Phillip
Can you say BIRTH TAX
Baystar only put in $20Mil originally. RBC put in the other $30 Mil. I'm figuring they probably paid RBC 7-8Million for the their 20,000 shares. So you figure they have about $28 Million. They get 13 cash and 2.1 Million shares(currently at $4.80) for another 8 Million. If they were smart(they are) they have been shorting SCO for some time(probably shortly after the deal was done) around the $15-20 stage. They will at the very least break even, but Im thinking they will actually make a very modest profit in the area of 3-5 Million. All that aside, I am sure even if they were to take a small loss, they are very happy not to have lost their shirts. They were sweating, the more they read on the case, the worse things looked. They talked about SCO dropping UNIX entirely and focusing on the IP. I think someone must have lifted the sheet and revealed the fine turd they had bought;-)
Without investment capital, many ideas cannot get off the ground; VC firms lose money all the time as they invest in new ideas.
And people like you forget that the economy is a myth- a shared myth, but still a myth. If we actually WANTED to advance as a race instead of just make money, we wouldn't put mythological obstacles in people's way trying to get new ideas off the ground in the first place. There SHOULD be no risk in new ideas at all; and if we had an economic system more like the one demanded by the Universal Declaration of Human Rights or Robotic Nation then we wouldn't need the venture capitalists or investors at all. Just survive on wellfare until your idea gets off the ground.
But no- redesigning the economic system for maximum efficiency would be stupid, wouldn't it?
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
I've seen lots of postings suggesting that Baystar may have hdged their own deal, but the question is: "where's the profit?".
OK, so Baystar can hedge against losses by shorting, but they also hedge against any profits.
So it's possible that Baystar did short and limited their losses, but by shorting, they would also limit their possible profits.
Take your case above. You show that Baystar would make no loss (and no profit) if Baystar shorted at $15 and the shares went from ~$15 to ~$25. What if Baystar shorts at $15 and the shares go down to $5? Well, Baystar has ALREADY paid an equivalent of $15 per share for the convertibles. So, no profits there either. The only way to hedge yet make profits is to have an option to get a refund on the initial investment at the same price as the initial price and Baystar did not have this.
So, I come back to my initial question: why invest if there are no profits to be made whichever way the shares move? In RBC's case, the answer is available: RBC's investment was always a hedge against a deal they did with a client, so RBC would make money from fees paid by the client in setting up the initial client transaction.
As to whether any slashdotters have profited: I can personally attest to making a modest profit from shorting SCO stock.
The real "Libtards" are the Libertarians!
SCO re-scheduled the earnings call for June 10. This is one day after the hearing on Daimler-Chrysler's motion to dismiss. Perchance SCO wants to have an early opportunity to spin the results of the hearing?
Then, SCO gives them back US$13 mill + 13 mill of monopoly dollars. They make a nice profit, just by keeping their mouth close and telling how good SCO is doing, and they even promise to keep the monopoly dollars, aka SCO stocks, to please the market. The anon. big investor label the US$40 mill as a Marketing item, corresponding to 0.1% of their total budget, and everyone is happy.
Bruce
Bruce Perens.
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.
This is a bit of bragging I guess but I shorted a few hundred shares from just under $14 down to just under $6. (you can find old posts of mine where I suggest shorting SCOX here on slashdot) Didn't make a fortune because I didn't have enough cash to short a huge amount (grad school) but it basically paid for my next computer. Thanks SCOX!
I've had a bit of luck in the past with "story stocks" like this one. Corel a few years back when they were getting into linux. I've had my eye on Rambus (to short) and Novell (to long) recently. I would have done Novell a few months back but ironically my money was tied up in SCOX. When a small company like these gets sufficent buzz the stock can do some pretty spectacular things regardless of the underlying fundamentals. Not stuff for the faint of heart but when you get it right...
We as a society can't afford to fund every idea and possible invention out there. We need people whose job (full or part time) it is to allocate capital and resources to the most deserving projects. Those that have the highest chance of success. Those people are called investors. Granted they don't make perfect decisions, however, if you could do a better job you'd be rich and you could decide which projects to fund.
The man who invests his money and attempts to create further value for society is to be commended over the man who gluttonously consumes his wealth.
I'll give you an example. Two brothers, Bob and Joe, have become very wealthy hockey players. Bob pisses away his money. He buys expensive cars, has statues erected and lives the high life. Many people are employed and jobs are created to provide the expensive items he is buying. However, these items are quickly consumed and there is no lasting benefit to society.
Joe invests his money in a telecommunications company. Using investor's money the company is able to fund research into high-speed data transfer methods. Money that Joe made from his hockey career is now paying for this research. Jobs are created, total knowledge of society is increased and society (consumers/businesses) receive better products and technology. This is the magic of our free markets.
We need more Joes and fewer Bobs.
you are laugthing, but RBC is still the richest bank in canada, and still the most profitable bank. Somehow, not mater what they invest in, smart banks always find a way to make money out of the situation. They are sneaky, real sneaky. Most non financial people think that it will serve them a lesson to act so foolishly, but a good bank have smart portfolio managers. meaning that no mater what they do, something else will ofset the losse and turn to profit. The worse part of it, is that the UNOFFICIAL, UNANNOUNCED offseting investment is the secret sauce of the company. Everyone knows that RBC invested in SCO, but i am betting that RBC has investment in beowulf cluster company too, which cost them penuts and are worth a fortune if SCO fails (this is because HPC is the fasted growing segment of it, if SCO is not in the picture.) Yep, so the point is VC may make stupid moves, but BANKS are sneaky creatures that if have secret backup plans worth doulbe as much if sneario one fails.
get microsoft and a bunch of unfortunate suckers to invest in it
I differ on this one. I fear that MS and Sun got their money on this one. While they may have lost a few bucks, they are both trying to stir up a hornets nest and leave the feeling that OSS can not be trusted. It remains to be seen if they actually did more damage to OSS or to themselves. If this backfired, I am guessing that Sun will be doing more layoffs before the end of Sept.
I prefer the "u" in honour as it seems to be missing these days.
It's not screwing anyone. It's a standard hedge
In fact, the short even defeats the main purpose of the convertible. "Convertible preferred stock" isn't really like common stock, despite the name. It's more like a bond (though not quite the same, or they'd call it a convertible bond, naturally...) In addition to loaning money, the lender gets the right to convert the principal amount to common stock at a particular price.
So, if the stock goes up, the lender can convert the preferred stock, and make some more money. If not, well, they made some money off the loan.
If you short the shares to which you can convert, you lock in the price -- fearing a fall -- but you also give up any gains if the stock does well. What you make on the convertible shares you lose on the shorts.
One of the main reasons to do this sort of thing is to lock in a sales price if you are afraid the stock will fall. Another is to get the price for a sale now without actually selling your stock now, which can result in different tax treatment.
I really don't want to inspire a flame war of any sort nor get modded down, but honestly, Bill Gates worked very hard to be in the nice position he's in now.
In the early stages of Microsoft, he ported an entire programming language onto a new platform in a matter of weeks. Although the stuff Microsoft churns out may not be the best, I have to give him credit for his business savvy and, at least for him, his technical brilliance.
That said, I don't use any of Microsoft's products. I just have to admire the company for how they've become what they are.
should wait until SCO wins their case. Then their stock will undoubtedly go up and they'll be rolling in dough... right?
Reminds me of the bully in school who picks on you every day and challenges you to a fight, and then when you finally agree to meet him after school, he's not there.
SCO's investors should hang by them until all their bones are ashes. Take a cue from the Bush administration and never say you've made a mistake. Stay the course... thousand points of light.. etc... We're all taking notes you stupid moron investement bankers.