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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...
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....
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 . . . . . .
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...
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
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.
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.
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
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.