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SCO and Baystar Strike a Deal

Posted by michael on 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.

111 of 336 comments (clear)

  1. Ha ha! by BWJones · · 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.

    --
    Visit Jonesblog and say hello.
    1. Re:Ha ha! by Skyshadow · · Score: 5, Funny
      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.

      Hey, if it worked for Bill Gates...

      (yeah, I know it's a cheap shot, but it's all I can afford at the moment)

      --
      Every year during my review, I just pray the words "slashdot.org" aren't mentioned.
    2. Re:Ha ha! by Anonymous Coward · · Score: 3, Insightful

      Hopefully it'll be a lesson to the VC's limited partners too, to watch out for sleezy VC firms. The VC's probably still get handsome fees for managing the fund. It's the investors in BayStar who lost their shirt on this one.

    3. Re:Ha ha! by moberry · · Score: 4, Funny

      What you should have done is hired Marta Stweart's old accountant, so before any of this went down you could have sold your stock.

    4. Re:Ha ha! by GPLDAN · · 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!"

    5. Re:Ha ha! by frisket · · Score: 3, Interesting
      This should be a lesson to VC funds and financing operations...

      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"...

    6. Re:Ha ha! by rice_burners_suck · · Score: 3, Insightful
      Your comment basically sums up my thoughts on this issue. I am disgusted whenever I read of a company that tries to make money through sleazy litigation.

      I can understand that, from time to time, there are legitimate issues in which companies need to involve the court system. But all too often, it seems like companies are being created based on the premise that corporations have a God-given right to eternal perpetually increasing profits, and that the government has a duty to protect those profits. And it is quite the opposite. Nothing says that any business deserves to exist, let alone make any profit. The only reason that a business should exist is because it is doing something constructive, from which all involved parties will benefit, and perhaps even because it's doing it a little better than the competition. I call this an innovative company. It is a company that didn't begin from the conscious decision to screw anybody over. It began because there was a problem to solve, and it solved it.

      The trouble with sleazebags like SCO is that they do not add anything constructive to the world. They exist because they made a conscious decision to profit by screwing people over. That is not an innovative company.

      I'd like to emphasize that I think there is nothing wrong with companies making profits. On the contrary, I am pleased when I see companies succeeding, because ultimately, that means the people working for those companies are making successful choices.

      But when some garbage company like SCO comes along and decides its sole purpose is to destroy an industry and profit from that destruction, the same way we obtain energy from matter by smashing it up in a nuclear reactor, that makes me mad, because I see how much of the work, blood, sweat, and tears of an entire community is going into the garbage, and how much energy, money, and effort must be wasted in defending against that garbage that could instead be used to advance the world and make it a better place.

      SCO is a garbage company. I hope this mess teaches all other investors not to touch that mass of stinking garbage with a nine foot pole. Because it's not worth it.

      SCO. We're garbage.

    7. Re:Ha ha! by EvilTwinSkippy · · Score: 2, Funny
      Bill Gates did not prostitute himself out. He merely bought almost every software product in his empire and bundled it together half assed.

      The great American dream. Money for nothing, and your chicks from your R&D department...

      --
      "Learning is not compulsory... neither is survival."
      --Dr.W.Edwards Deming
    8. Re:Ha ha! by MikeXpop · · Score: 4, Funny

      Keep in mind Melinda Gates was the R&D genius that suggested Microsoft Bob, so I don't think he got the brightest star out of that crowd.

      --
      Etiquette is etiquette. He kills his mother but he can't wear grey trousers.
    9. Re:Ha ha! by Fnkmaster · · Score: 4, Informative
      This is slightly different - this is a private equity fund, they do later stage investments than a venture capital firm. In particular, Baystar Capital specializes in PIPE investments, according to their own web page - Private Investments in Public Equities. These are private placements of capital to companies that are already publically traded in the market, so much later stage than true VC, more likely to be public companies that have stumbled on a cash-strapped period of time, but with well-established businesses and track records behind them.


      Generally, you aren't making the same kind of bet that 85% of everything you put money into will flop in private equity, and you don't get the kinds of massive multipliers on success that you get with early stage VC (where a 10 million dollar investment might turn into 200-500 million dollars worth of equity after IPO or a big acquisition deal for the real "blockbuster" companies).


      I'd guess that a 2x-4x multiple on their successful investments would be considered quite good (remember, these are mostly already publically traded companies). So actually taking a 50% hit on an investment would not be great for these guys, but it's still par for the course. Some people here are speculating they were partially hedged, though I'm not sure it would be possible to effectively hedge such a massive position in a stock that was difficult to short in the open market, though I guess they could have written their own options.


      According to their own site, they've invested $745 million as a fund, which means 50 million was about 8% of their entire fund. So losing half of it, while not devastating, is definitely not a trivial amount even for a fund like this.

    10. Re:Ha ha! by ThisIsFred · · 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
    11. Re:Ha ha! by nsuttitinagul · · Score: 2, Interesting

      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.

    12. Re:Ha ha! by Lorean · · Score: 3, Funny

      I bet that marrying Bill was punishment for Microsoft Bob. ;)

    13. Re:Ha ha! by hopethishelps · · 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.
    14. Re:Ha ha! by HogynCymraeg · · Score: 2, Funny

      You think a robo-house would help? Personally, I think a shower unit alone would do the trick.

    15. Re:Ha ha! by CTachyon · · 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.

      --
      Range Voting: preference intensity matters
    16. Re:Ha ha! by Dick+Faze · · Score: 2, Insightful

      Yes, and he borrowed even that idea from the Steel industry around the turn of the century.

  2. Hmmm by Anonymous Coward · · Score: 5, Funny

    1) Start up a private investment company 2) Invest $50,000,000 in SCO 3) ??? 4) Prof.. wait, I think I'm doing this wrong

    1. Re:Hmmm by cipher+uk · · Score: 5, Funny

      yeah you missed the
      's

    2. Re:Hmmm by WindBourne · · Score: 2, Interesting

      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.
  3. some is better than none by lawngnome · · 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...

    1. Re:some is better than none by Wiseazz · · Score: 5, Funny

      sco gets their ass handed to them

      It would be cooler if it was their still-beating heart.

      --
      My sig sucks.
    2. Re:some is better than none by iDaZe · · Score: 5, Funny

      It would be cooler if it was their still-beating heart.

      That would imply they have one

  4. This is great by JTMON · · Score: 3, Insightful

    One of the finest examples of real world karma in action..:)

  5. loss ? by s0m3body · · Score: 2, Interesting

    26M$ is still much better then what it would be in four to eight weeks time

    1. Re:loss ? by slam+smith · · Score: 3, Informative

      I't's really not 26 mil though. They will never be able to sell those shares for 13 mil. SCO stock would crash if they tried.

      --
      My Weblog
    2. Re:loss ? by wolfdvh · · Score: 2, Informative

      Of course, really it is not $26M unless they can dump the common stock for the $13M which if they try to do all at once would certainly drive the price through the floor.

    3. Re:loss ? by s0m3body · · Score: 2, Interesting

      put it this way, $13M cash + $13M common stock is still several times more then $50M investment in SCO

    4. Re:loss ? by Kierthos · · Score: 2, Informative

      I'd say less time then that, actually. Until a change earlier today, SCO was going to announce their Q2 earnings on the 3rd of this month. They've just moved that to the 10th of this month.

      Now, it really doesn't matter if they are making or losing money at this point. All that matters is if they are making more money then predicted, or losing less money then predicted. In either case, their stock may rise.

      However, if their Q2 earnings are below market predictions, (or their losses are greater then market predictions), then their stock will likely drop a bit more.

      And considering that it dropped in value 7.3% today (-0.38 to 4.81), it wouldn't take much for it to drop to a point where it could be delisted.

      Kierthos

      --
      Mr. Hu is not a ninja.
  6. Stock to TP conversion by raistphrk · · Score: 5, Funny

    Well, the good news is, RBC and Baystar are giving all of their employees a year's supply of SCO brand toilet paper for free. Two-ply.

    1. Re:Stock to TP conversion by Klanglor · · Score: 2, Interesting

      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.

    2. Re:Stock to TP conversion by Jaysyn · · Score: 2, Funny

      The point was that they were going to use the stock for toilet paper, because it was cheaper. That was the joke. You missed it.

      p.s. the OpenServer manuals are the handtowels anyhow.

      Jaysyn

      --
      There is a war going on for your mind.
  7. A hole below the waterline by Anonymous Coward · · Score: 4, Insightful

    Even the rats that funded this FUD operation see the handwriting on the wall. Half their cash is better than none....

    1. Re:A hole below the waterline by oolon · · Score: 3, Informative

      Half? They got 13 Million of the 50 Million in cash, and 13 Million Shares. Your are assumming they will be able to dump 13 million in stock and get 13 million for it, I expect if they sell that stake they will get far less. At current levels, thats about 2.7 million shares, the daily volume for SCOX is just 260,000. No way they are going to be able to clear that stake. On the plus side if they dumped 2.7 million shares of scox on the market it would go into a nosedive it probably could not pull out of. I think the bank assumed they could get about third of the money back so took the deal, as they really could not see the stock going anywhere else other than down.

      James

  8. Look at the bright side by bstadil · · Score: 3, Insightful
    Look at the bright side. Baystar and RBC got shafted as they so richly deserve and there is potential more money to be had by IBM when SCO is ordered to pay legal fees.

    Obviously this requires they case is decided before they are totally broke. A big if, but looking better every day.

    Thirdly we will have a clear wipeout of SCO. If they went bust before the fat lady sings this could still leave some doubt (FUD residue) about the GPL etc.

    --
    Help fight continental drift.
  9. Wow by neilcSD · · Score: 5, Interesting

    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.

    1. Re:Wow by Salsaman · · Score: 2, Informative

      They don't have any patents. Just some disputed copyrights on Sys V and a license agreement with IBM.

    2. Re:Wow by MoonBuggy · · Score: 2, Insightful

      MS have good business sense, that's what put them on the top today. I'd think even they, in their evil ways, know it's a bad idea to take up a suit against IBM that'd already bankrupted SCO, especially when SCO clearly don't have a case.

    3. Re:Wow by AgntOrnge · · Score: 2, Funny

      no, no, no MS doesn't sue for patent infringment they GET sued for patent infringment. geez and you call yourself a /. reader

    4. Re:Wow by Compuser · · Score: 3, Insightful

      This makes Boies look like a genius.
      1. Take a ridiculously bad case for buttload of money.
      2. Wait until the client runs out of money.
      3. Scram before the case is resolved so there is
      no case loss on your resume.
      4. Duh!

  10. Actually a little less than half... by Sebby · · Score: 5, Interesting
    Since I've taken my money from RBC to another bank, mostly due to their involvment w/SCO.

    Their (even bigger) loss.

    --

    AC comments get piped to /dev/null
    1. Re:Actually a little less than half... by cpaluc · · Score: 2, Insightful

      heh, banks don't want your money, they want your debt.

    2. Re:Actually a little less than half... by Anonymous Coward · · Score: 2, Interesting

      OK here is how it works with your money. And yes banks *MUST* hold onto money in order to loan money out.

      1) you put in your money 100 dollars (I made that up :))
      2) they take that money and loan out 80% of that money. The percentage is set by the Federal Reserve in the United States. Other nations do the same sort of thing.
      3) That 20% MUST be (by law) in 'liquid' cash assests that the bank can convert back quickly incase you 'cash out'. Now not everyone cashs out at once so this works OK. Usually held as gold, cash, or federal bonds at the federal reserve.
      4) The 80% is loaned out. Now most people who 'borrow' money borrow it right back into... wait for it... their bank account at the same bank.
      5) Then 20% is kept of that 80% and 80% of that goes out.
      6) rinse and repeat

      Now lets say you 'cash out'. They still have the other 20%'s they MUST keep. But they still have a large outstanding debt owed to them. It does not 'unwind' as it were. You basicly already floated them enough loan to make a loan to do what they wanted.

      Sooooooo in this example my magic 100 dollars becomes '400' in cash (after 30 iterations). 100 dollars that *MUST* be kept around. Also 300 dollars of LOANABLE money.

      Now lets say I keep 20 thousand in there. This is not far fetched. Just 5 or 10 people could have that much 'saved' eaaaaaaasy. That 20k after a few iterations becomes 100k cash, 80k loanable, 20k must be there.

      Now the actual 'loan' rate is MUCH lower (like 1-3 percent). This makes the actual money values MUCH larger. Also the amount that must be held is quite small.

      I too have my money in RBC (about 5k). I didnt really care. They have a better account than the rest around here (free checking yada yada yada). And with *MY* money. That sort of thing counts. I do not vote with principles with my money. I vote with what makes my stack-o-cash bigger or at least not as small.

  11. Profit by _Sprocket_ · · Score: 2, Insightful

    I suppose we won't be seeing any Baystar 3 step plans to profit jokes with this story.

    1. Re:Profit by WasterDave · · Score: 4, Funny

      1. Invest in SCO.
      2. ?
      3. Loss!

      Sorry,
      Dave

      --
      I write a blog now, you should be afraid.
  12. Look on the bright side by L.+VeGas · · Score: 5, Funny

    SCO let them run Linux without having to pay that licensing fee.

    --
    Best Windows Freeware
  13. Somehow by FS1 · · 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.

    --
    A Fatal OE Exception has occurred, Sig will now reboot.
  14. Bow to Your Master's Card by Anonymous Coward · · Score: 5, Funny

    Baystar and the Royal Bank of Canada investment:
    $ 50 million.

    Money lost on investing in SCO:
    $ 23.3 million.

    Poetic humiliation and embarrassment as payback for all the SCO's actions against Linux Users:
    Priceless.

  15. How to make a small fortune investing in SCO stock by Anonymous Coward · · Score: 5, Funny

    First, start with a large fortune . . . . . .

  16. Dump it! by gcaseye6677 · · Score: 2, Insightful

    Baystar had better dump that common stock right away. The price fell more than 7% today alone, and I can't imagine how bad its going to tank on the 10th, when SCO has to announce its earnings (the call got pushed back from tomorrow so they can have time to properly prepare their FUD). This will have to put a serious dent in their legal budget, and combined with the inevitable fall in stock price and decreasing revenues, I think the end for them might be very close.

    1. Re:Dump it! by ptbarnett · · Score: 2, Interesting
      Baystar got about 740,000 shares of common stock.

      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.

  17. Apparently not. by ron_ivi · · Score: 5, Interesting
    Aparanetly not... According to Baystar, they're happy with SCO's cash management, and mangement of the litigation.

    Quoth the article:

    "...BayStar is extremely satisfied with SCO's current operating and cash management plans, new initiatives, management of the litigation, and plans for improving its business going forward," said Larry Goldfarb, managing general partner, BayStar Capital.

    Now if they're so happy, why are they buying their shares back?

    1. Re:Apparently not. by alw53 · · Score: 2, Insightful

      They have a ton of stock to unload and they have to try and prop the price up while they unload it.
      They are limited to 10% of the average daily volume by the terms of the agreement, so it's going to take them awhile.

    2. Re:Apparently not. by Anonymous Coward · · Score: 2, Funny

      So, let's see:

      1. Invest in evil.
      2. ???
      3. Sell back to evil
      4. Profit !!!

      Oh, wait.

    3. Re:Apparently not. by alw53 · · Score: 5, Informative

      80 days in fact, today's volume was 262,879,
      and 10% of that is only 26,000 shares.
      They have 2,105,263 shares to dump!

  18. Just goes to show... by MooseByte · · Score: 4, Interesting


    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...

    1. Re:Just goes to show... by kcbrown · · Score: 2, Insightful
      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...

      You actually expect any arm of the government to actually do something against Microsoft?

      <snicker>

      And you think that the DoJ's previous behavior is because they lack balls rather than because they're on the take?

      Bwahahahaha!

      --
      Use 'slashdot stuff' in the subject line in any email you send me if you want to get past the spam filter.
  19. So SCO made money? by Luddite+Slayer · · Score: 3, Interesting

    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.

    1. Re:So SCO made money? by overbyj · · Score: 4, Interesting

      It sure seems that way based on the quote from Darl:

      "We're pleased that we are able to repurchase and retire the Series A-1 shares and we believe the agreement will benefit the Company and its shareholders," said Darl McBride, President and CEO, The SCO Group, Inc. "This agreement will eliminate restrictions, covenants, preferences, accruals for dividends, and allow the company greater flexibility to manage key aspects of its strategy moving forward. We believe the net effect of this agreement will allow the company to focus on its strategic initiatives, retain sufficient cash to defend its intellectual property, accomplish its corporate objectives and provide greater flexibility in the management of our operations."

      Darl sure tries to put a nice spin on this. The key part is the "retain sufficient cash". Basically, they suckered BayStar and RBC here.

      --
      No trees were harmed in the composition of this; however, numerous electrons were inconvenienced.
  20. This just in... by GPLDAN · · Score: 3, Interesting

    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."

  21. SCO stock is like ... by Anonymous Coward · · Score: 5, Funny


    Daryl (to self): Our stock is like a stream of bat piss.

    Investor (in alarm): What did you say?!!

    Daryl (was that outloud?): What I said was .. err .. our stock shines out like a shaft of gold when all around is dark.

  22. Good deal for Baystar. by Jaywalk · · Score: 3, Interesting
    So they get more than a quarter of their original investment back in cash and still have common stock they can sell off if SCO (*cough*) recovers. Under the circumstances, I'm kind of surprised SCO came up with such generous terms. If they had stuck to the contract they wouldn't have had to come up with nearly that amount. I'd be willing to bet that SCO said some things in negotiating the deal that they shouldn't have and that Baystar effectively blackmailed them by saying they'd let all those indiscretions come out in court.

    Any takers?

    --
    ===== Murphy's Law is recursive. =====
  23. Buy the rest of the Stock for $699 ?? by beatleadam · · Score: 3, Interesting

    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
  24. You think it's funny, but actually ... by mec · · Score: 5, Informative

    When an investor such as Baystar does one of these convertible preferred deals, they can do something called "shorting against the convert".

    Here's how it works. At the time Baystar bought their convertible preferred shares, SCOX was trading at about $15 (roughly ... I can't be arsed to hit Yahoo Finance right now). Well, Baystar can sell shares at $15. They can sell shares that they don't even own ... that is called "short selling", and is a normal transaction on the stock market.

    You start with 0 shares, you sell (say) 10,000 shares at $15, now you have $150,000 cash and a position of -10,000 shares SCOX. (That's right, negative numbers!) Later, you buy those 10,000 shares back at $5 per share, leaving you with $100,000 profit and 0 shares of SCOX.

    What if you short at $15 and the stock goes to $25? Then you lose $10 per share on every share that you shorted. Except ... if you've got a convertible ... you just pull out the convertible preferred shares and convert them, in order to have shares.

    I'm not saying Baystar did this, but it's a common strategy for holders of convertibles. A convertible is really just a bond + a call option, and shorting against a call option is a common strategy.

    In other words, you guys are laughing that Baystar is stuck with a bunch of $5 SCOX shares, but Baystar may have already sold them a few months ago at $15 or $20. They'll just use these conversion shares to deliver back on the shares that they borrowed+sold at $15 to $20.

    1. Re:You think it's funny, but actually ... by GigsVT · · 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).

      --
      I've had enough abrasive sigs. Kittens are cute and fuzzy.
    2. Re:You think it's funny, but actually ... by TheWizardOfCheese · · Score: 5, Informative

      The parent is an excellent post, and deserves to be rated +5, informative. However, I would like to point out a technical error to those Slashdot readers who understand finance:

      A convertible is really just a bond + a call option, and shorting against a call option is a common strategy.

      No. Many, many tears have been shed over this fallacy. Most converts are like a bond + call, so long as the credit of the name remains good. The credit will be reflected in the underlying stock price, and in this region, the bond value acts as a floor, producing an option-like value profile with positive gamma. That means that since you are long the option, your delta hedge will be profitable even if you can't rebalance. However, when the name is close to default, the bond value itself will go to zero; this produces a region of negative gamma. A convert thus has both positive and negative gamma, quite unlike a vanilla option; it's definitely possible to lose your shirt even if you're delta hedged.

      --

      "The good reader is a rarer swan than the good writer."
    3. Re:You think it's funny, but actually ... by whoever57 · · Score: 2, Interesting
      When an investor such as Baystar does one of these convertible preferred deals, they can do something called "shorting against the convert".

      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!
    4. Re:You think it's funny, but actually ... by Bruce+Perens · · Score: 3, Interesting
      This only works if there are short positions available. Which have been hard to find in SCOX. Are you shre they could do this?

      Bruce

      --
      Bruce Perens.
    5. Re:You think it's funny, but actually ... by Anonymous Coward · · Score: 2, Interesting

      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.

    6. Re:You think it's funny, but actually ... by Anonymous Coward · · Score: 2, Informative

      Well, they are all real words:

      Gamma: rate of change (1st derivative) of Delta. Somewhat of a risk measure.

      Delta: how much the price of the option changes with respect to the price of the underlying stock (partial derivative of option price w.r.t stock price).

      So if SCO goes up $5 and the option contract goes up $1.00, Delta must be 20%. Usually Delta is low for out-of-the-money call options, and high for in-the-money options.

      There is also Theta (time effect) and Vega (not a real greek letter, measure volatility).

      I'm not sure I know what a "delta hedge" is, but maybe it's related to the fact that generally you can balance the options against the stocks (i.e. take a position in both, allocated according to Delta) so that changes in one are canceled out by changes in the other. Here you would be looking for arbitrage opportunities.

      The poster says Gamma goes high and negative when the bond issuer is close to default, so that would be a sign of high risk, and that would be a position to avoid (especially if you were hoping for positive Gamma!).

      I never trade options but I find the math fascinating, what little I understand of it. What's really fascinating is that the inputs to all these wonderful formulas are basically random numbers, so it's all just mental masturbation past a certain point. But masturbation can be fun as many slashdotters know. :-)

  25. I'm Now Taking Bets... by the_mad_poster · · Score: 4, Interesting

    ... 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!
  26. Let me summarize... by Fnkmaster · · Score: 4, Informative
    They realized the 50 million was a big fuck up. The general VC/Private Equity reaction to a big fuck up is to get back what you can, save face for yourself, and try not to destroy/discredit the company publicly if at all possible (it makes it harder for them to get companies to do deals with them in the future).


    That's precisely what they are doing here. Getting back what cash they can, getting a bunch of shares they can slow-dump back to the market, and not fighting a big, messy legal battle to get their 50 million back. Of course, SCO doesn't have 50 million in cash to give them and it would effectively shut SCO down, or force other fairly dire measures on them to get together 50 million bucks and still have operating capital - while Baystar itself may not give a crap, it would look quite bad for them to screw over a company they had invested in that badly.


    So I guess we are left to wonder why Baystar bought into this deal in the first place. I have no idea, and I know there are lots of sinister motives assigned to this, but I'm sure some of the characters involved just got suckered into what sounded to them like a sure-fire legal get-rich-quick scheme - which is all that SCO's business is at this point.

  27. Re:Suck it, Linux Tards by Anonymous Coward · · Score: 3, Interesting

    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".

  28. SCO's Scam by Blackeagle_Falcon · · Score: 5, Funny

    Is it just me or does SCO's need for venture capital to fund it's IP litigation remind anyone else of one of those Nigerian 419 scams?

    Think about it, someone (SCO) has a line on a lot of money in the Nigerian central bank encumbered by some sort of red tape (IBM, Novell and basically every Linux user on the planet think SCO is full of hot air). They just need some cash up front in order to get it out (have to hire a bunch of soulless IP lawyers). If you are willing to front them them some money (invest in SCO) you'll get a phenomenal rate of return when the money is freed up (SCO wins their suit, or pigs fly, whichever comes first).

    The parallels are striking. Poor Baystar, they got taken by one of the oldest ones in the book.

  29. Re:So... by k98sven · · 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.

  30. June 10th by paintballluvr · · Score: 2, Informative

    Now can the damn stock please crater?

    Just wait till June 10th. They're giving their report. It very well could tank that day.

  31. Re:Finally! Some proof that pushing paper alone by Proteus · · Score: 2, Insightful

    The fact that you think investors merely "suck off the hard work" of other people shows how little you (and most people) grasp economics. Without investment capital, many ideas cannot get off the ground; VC firms lose money all the time as they invest in new ideas.

    The upshot of this is that people get the opportunity to try new things even if they can't afford to take the risk personally -- this actually feeds money into the economy, creates jobs, &c.

    --
    We may not imagine how our lives could be more frustrating and complex—but Congress can. – Cullen Hightower
  32. Branson of Virgin by bstadil · · Score: 2, Funny
    The comment is one made by Branson of Virgin. How to become a millionaire by starting an Airline.

    Start as a Billionaire

    --
    Help fight continental drift.
  33. SubGenius fodder for sure by Weaselmancer · · 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

    --
    Weaselmancer
    rediculous.
    1. Re:SubGenius fodder for sure by Anonymous Coward · · 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.

    2. Re:SubGenius fodder for sure by Milican · · Score: 3, Informative

      You can buy an option to insure that a short doesn't eat your lunch. I would have shorted the stock, but the options were sold out.

      JOhn

      --
      Campaign for Liberty
    3. Re:SubGenius fodder for sure by BCoates · · Score: 2, Interesting

      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?

    4. Re:SubGenius fodder for sure by fname · · Score: 4, Informative

      Well, when this was first announced, SCOX was trading at about $1. So when would you have shorted? $2, $5, $10? If you shorted $10,000 at $5/share, by the time it hit $20, you'd have to deposit an additional $30,000 to cover the difference in what you owe, otherwise you would need to sell.

      So ya, if you shorted at $20 you would have made a killing (almost double your investment). If you shorted at $5, you would probably have been forced to cover, losing double, triple or quarduple your initial investment. So it never would have been that easy.

    5. Re:SubGenius fodder for sure by Phillup · · Score: 3, Interesting

      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
    6. Re:SubGenius fodder for sure by Spruce+Moose · · Score: 5, Informative
      Stocks very often don't go to infinity so losses are hardly 'unlimited'.

      Also read about stop -loss orders on how you can limit your losses.

      "There is no such thing as a sure thing" is also a cool paradox. (-:

    7. Re:SubGenius fodder for sure by EvilTwinSkippy · · Score: 2, Funny

      Well some of use actually want to live in our house for a little bit before we lose it to the bank. "Sorry sweety, you can't have new shoes because daddy lost big short selling stock" really doesn't cut it.

      --
      "Learning is not compulsory... neither is survival."
      --Dr.W.Edwards Deming
    8. Re:SubGenius fodder for sure by whoever57 · · Score: 2, Informative
      You know the joke about the whole SubGenius thing..."If you're so smart, why aren't you rich?"

      Because intellignece is not the key attibute required for wealth -- I believe the dominant attribute is a lack of morals.

      I'll betcha not a single person on all of Slashdot cashed in on these fools. Damn.

      Not true: I made a modest profit from shorting SCO stock.

      --
      The real "Libtards" are the Libertarians!
    9. Re:SubGenius fodder for sure by wayne606 · · Score: 3, Insightful

      The problem is that most of us think "the company sucks and is worthless, so I will short it". But you're really betting that the average investor, who may be a lot more vulnerable to SCO's evil PR, is going to agree with you in the immediate future. That's a very different thing...

    10. Re:SubGenius fodder for sure by WhiteWolf666 · · Score: 4, Informative

      I did....

      Well, I tried, anyways.

      I spent nearly 4-5 days, every twenty minutes or so, trying to short SCOX. At $20, $22, even $18.

      Go look at my post history, I talk about it at the time SCOX was up there.

      I would have shorted 5,000, even 10,000 shares.

      I don't know exactly why, but there wasn't enough of a 'float' on SCOX for the mainstream brokerages to allow individuals to 'short' it.

      I was pissed off. I've spent the last few months bitching about it to my co-workers.

      In 'short' (no-pun intended), you didn't miss out on anything. It simply wasn't possible to begin with.

      I tried, and got nothing. Oh well *sigh*

      --
      WhiteWolf666 an exBush supporter. All you new-school,compassionate,save the children Republicans can rot in hell
    11. Re:SubGenius fodder for sure by Ruie · · Score: 2, Insightful
      I wonder if Baystar is now in position to pull a short squeeze.

      I.e. they lend others theirs shares to short and buy them up simultaneously.

      Then when the time is up to return the shares Baystar is the only game in town and they sell their shares (which they have 2x or more of) at a profit. The actual shares they are left with are then irrelevant.

    12. Re:SubGenius fodder for sure by Technician · · Score: 2, Insightful

      Didn't have the balls to play on the short side, because I can't tell who all is in that bed...

      That's why I'm not shorting MS stock. They may lose the server market and some desktop market to Linux, but this being in bed with Hollywood with the DRM thing may make them the next living room cable TV subscription box. There are enough people that don't want in bed with MS, it could go either way.

      --
      The truth shall set you free!
  34. If they go under $.20 a share by Greyfox · · Score: 4, Funny

    Can we stage a hostile takeover and fire Darl? I'd kick in $20...

    --

    I'm trying to teach myself to set people on fire with my mind... Is it hot in here?

  35. Poor, hoodwinked BayStar.... by Vancouverite · · Score: 5, Interesting
    Not only did they lose big bucks up front ($13 Mil back from an initial $20 mil + whatever they paid RBC for their shares), but they will be dumping this stuff for months!

    From the PR:

    The agreement includes a restriction on sales and dispositions by BayStar of the Company's common stock. BayStar may not exceed on any trading day, 10% of SCO's average daily trading volume on Nasdaq during the five trading days preceding such trading day. The agreement includes a mutual general release by the parties and has not required compensation to any outside agents.
    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...
  36. Burn rate bites large chunk... by WCMI92 · · Score: 4, Interesting

    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
  37. Interesting Darl Interview... by mikael · · Score: 4, Interesting

    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
    1. Re:Interesting Darl Interview... by EvilTwinSkippy · · Score: 2, Funny

      That's simple. they have a brand that resembles rawhide with hair on it. It can be in black, brown, or white. Utters and horns are also signs of their brand.

      --
      "Learning is not compulsory... neither is survival."
      --Dr.W.Edwards Deming
  38. For more by sjvn · · Score: 2, Informative

    See:

    http://www.eweek.com/article2/0,1759,1605475,00. as p

    Steven

  39. Re:Suck it, Linux Tards by k98sven · · Score: 3, Informative

    And analysts still recommend it as a "strong buy".

    Actually they don't. Only Deutsche Bank feels that way. And the analyst who formed that opinion, Brian Skiba, doesn't work there anymore. Interesting.

  40. My Belly by LouSir · · Score: 3, Funny

    I would like to invest my beer gut into SCO. Then in 6 months I have only 1/2 a beer gut. Sounds good to me. Lou Sir

  41. Doing the numbers by Anonymous Coward · · Score: 3, Interesting
    Lets work out the numbers. At Microsoft's suggestion, Baystar invested $50 million cash in SCO. They getting back $13 million in cash and $13.7 million in stocks that will soon be almost worthless.

    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

  42. It seems like a big loss but... by Anonymous Coward · · Score: 2, Funny

    If they're talking Canadian dollars, that 6-1/2 million dollar loss is like, what, $847 USD?

  43. Bed Information by possum99 · · Score: 3, Interesting

    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;-)

  44. Does this mean the real Darl is back? by bstone · · Score: 3, Funny

    Is Darl going to be able to start shooting off his mouth again? Will we get a new laugh every few days as he makes outrageous claims, sues more people, contradicts himself publicly, etc.

    I just can't wait. Perhaps they'll sue the penguin lovers society first, followed by 'all programmers', then on to some bizarre victims of their wrath.

  45. Re:Finally! Some proof that pushing paper alone by Marxist+Hacker+42 · · Score: 2, Interesting

    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.
  46. Re:Finally! Some proof that pushing paper alone by Marxist+Hacker+42 · · Score: 3, Insightful

    At one point in my life, before the death of three companies that tried to go public only to get all long term R&D money yanked away in pursuit of the three-month bottom line, I actually played around with being a conservative. It went so far that I voted for Bush in 2000- BIGGEST MISTAKE OF MY LIFE. Within a year I had been pushed out of private industry alltogether- and it was 26 months before I finally landed a job with government. There is no good left in capitalism- it's broken to the point that long term research or even short term breakthroughs have become impossible. And we wonder why the computer revolution has hit a plateau.

    --
    SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
  47. Interesting timing on the rescheduled earnings... by rewt66 · · Score: 4, Interesting

    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?

  48. Shorting SCOX by sjbe · · Score: 2, Interesting

    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...

  49. Options by sjbe · · Score: 4, Informative

    You can buy an option to insure that a short doesn't eat your lunch. I would have shorted the stock, but the options were sold out.

    No offense but I doubt that is the reason. There are no options publicly traded on SCOX. Wish that there were, I could have made a killing.

  50. Re:Finally! Some proof that pushing paper alone by RajivSLK · · Score: 3, Interesting

    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.

  51. These shrewd investors by mabu · · Score: 2, Interesting

    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.

  52. Re:Finally! Some proof that pushing paper alone by dont_think_twice · · Score: 2, Insightful

    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.

    Now take a different example: Bob spends his money on expensive cars. The car company takes the money they made off his purchases and invests it in R&D, and develops an entirely new power source, revolutionizing transportation.

    Joe, on the othe hand, invests his money in a telecommunication company that subsequently fails. The technology the company develops is lost and Joe becomes a homeless preacher screaming "God will seek vengance on your souls" to passerbys in Times Square.

    The point? That your examples are meaningless. You simply attributed a positive outcome to the action you endore, and a negative outcome to the action you disagree with.

    The whole idea of a "market" is that, on average, any investment will return approximately the same value. Usually higher risk investments, such as those that VC's engage in, return more, since it is necessary to have a lot of money in the first place to participate in those. But in general, the market itself performs the equalization, making sure that there is not a huge advantage to investing in one area.

    Investing money is only beneficial to society if the end result of the investment benefits society. Is it beneficial to invest in a company that makes nuclear weapons to sells them to terrorists? In that case, I think we would rather that you spend your money on the Ferrari.