Investors Bailing On SCO Stock, SCOX Plummets

HailDorothy writes "SCO's stock price is plummeting in the aftermath of Judge Kimball's ruling that Novell owns the UNIX copyrights, as we discussed earlier. '[W]e will continue to explore our options with respect to how we move forward from here,' SCO said in a public statement issued in a futile attempt to calm investors. SCO's stock price has fallen 70 percent during trading today, reaching a 52-week low. It looks like the end is near for SCO, which still owes Novell 95 percent of the SVRX UNIX royalties it collected from Microsoft and Sun through the SCOsource program. As Judge Kimbell noted in his ruling, it's unlikely that Novell will ever be able to collect on those royalties."

Comments

The Financial Situation For SCO

[SEE]

As of April 30, 2007, SCO had $19.847 million in total assets (which includes no intangibles), and $12.654 million in total liabilities, according to the Reuters data

The ruling on the Microsoft/Sun royalties owed to Novell adds roughly $25 million to the liabilities, making SCO worth roughly -18 million dollars, book value.

Re:Someone bought those shares today.

[danpat]

For people who don't know what a "short" is, it's where you borrow stock from the real holder, then sell it right away. Some time later, you buy it back at the new market price, and return it to its owner. The difference in what you sold the original stock and what you re-purchased it for is your profit. If the stock price rises, you lose money. If it drops, you make money.

My guess would be that a large number of short positions were closed today. Lots of people had shorted SCOX (i.e. borrowed them, then sold them at some earlier date). Today, when the price dropped, they re-bought the stock at the current market price and returned them to their owners.
I personally haven't had enough experience with the market to know how big an influx of short closers it would take to drive the stock price back up again.

What's going to happen - according to AllParadox

[Anonymous Coward]

AllParadox is a retired lawyer who has been following the SCO cases and commenting; first on Groklaw, and more recently on InvestorVillage. He is actually an expert both on the law and on the SCO cases in particular. Here are exerpts from a few of his posts since Judge K's decision came down:

IMHO, the probability of these fools filing for Chapter 11 bankruptcy is reasonably high. I put it around 99.999%, give or take.

The forms are already prepared, they just need to be signed and filed. No, I am not an insider, and I am not privy to inside information. I even have trouble getting outside information. But the forms still have been prepared.

Filing will be soon. Probably next week, if not, then in the week after.

Furthermore, the chances of that being rapidly turned into a chapter 7 is also fairly high, around 99.9%.

 

One more option for "Andrea's Husband":

Sing. Sing like a little birdie. Sing long and loud. Bury IBM in the letters and emails and notes and appointment books and recorded telephone conversations and everything else that will prove beyond all doubt that this whole sordid mess was orchestrated and funded by Microsoft to inhibit Linux and interfere with IBM business practices.

That will, by the way, save Darl's money. If he proves that the money from Microsoft was only nominally a payment for a UnixSysV license, when in fact it was a bribe paid to SCOX for SCOX to sue IBM, then there is a plausible argument that Novell should not receive these funds as monies held by a fiduciary.

In my experience, it has a very good prospect of even keeping him out of jail, because the world will be distracted by the main event: IBM v. Bill Gates & Co. Then, a trite line from an old, old, movie will be apropos: "Feeling Lucky, Punk?"

 

Still, it is possible. There have been criminal cases where the criminal defense attorney was paid with money that could be traced back to drug deals, but only after the fact. The Government went back to the attorneys and extracted back their fees.

 

Conversion. It means the money in their hands actually belongs to someone else.

It means that whatever amount is eventually decided to belong to Novell may be recovered.

It may even be recovered from those people paid with it, if they were reasonably aware of the nature of the conversion.

I will shout here:

THIS IS NOT DISCHARGEABLE IN BANKRUPTCY. IF NOVELL ASKS FOR IT, DARL HAS TO GIVE BACK HIS PAYCHECKS. HIM AND YARRO BOTH. Novell has the burden of proof in Darl's bankruptcy, so it is not automatic, but Darl is now a busted flush.

Based on the misery that is in store for them personally, Darl, Yarro and the lawyers all have to figure out how to save their hides. They might be able to do that if they can point to any evidence that points at Microsoft. That would direct IBM's attention away from them and IBM might be grateful. Otherwise, they will probably lose all the ill-gotten gains they have accumulated so far.

Re:Who invested is SCO anyways?

[Sangui5]

See http://finance.yahoo.com/q/mh?s=SCOX for a list of major holders.

Mostly, it looks like large investment institutions hold the bulk of SCO shares. Probably these are part of "total market" indexes and mutual funds. Since SCOX is still listed, they would still be a component of such funds.

The best I can tell, the insiders are mostly gone. The largest holder of SCO seems to be Glenn J Krevlin. There are some articles out there linking him to some other bad smelling companies; the phrase "smoke & mirrors" seems common. SCO sounds right up his ally.