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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.
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) Start up a private investment company 2) Invest $50,000,000 in SCO 3) ??? 4) Prof.. wait, I think I'm doing this wrong
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...
One of the finest examples of real world karma in action..:)
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.
Even the rats that funded this FUD operation see the handwriting on the wall. Half their cash is better than none....
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.
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
SCO let them run Linux without having to pay that licensing fee.
Best Windows Freeware
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.
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.
First, start with a large fortune . . . . . .
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
1. Invest in SCO.
2. ?
3. Loss!
Sorry,
Dave
I write a blog now, you should be afraid.
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."
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
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
When an investor such as Baystar does one of these convertible preferred deals, they can do something called "shorting against the convert".
... 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.
... if you've got a convertible ... you just pull out the convertible preferred shares and convert them, in order to have shares.
Here's how it works. At the time Baystar bought their convertible preferred shares, SCOX was trading at about $15 (roughly
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
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.
... 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!
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.
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".
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.
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.
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.
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?
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...
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
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.
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
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
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;-)
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.
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.
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?
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.
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.