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

Darl?

[Anonymous Coward]

When are we going to get to see Darl McBride's head on the end of a stick? Or is that asshat not going to be accountable?

Re:Darl?

[Cpt_Kirks]

I have been thinking about that.

He made a lot of statements that could be taken as fraud. I wonder maybe IBM could send a package over the the SEC or the Justice Department...

Re:Darl?

[Lunix Nutcase]

The crime was an attempt at using FUD to defraud both Novell and other companies and Linux users into paying them protection money. Such acts are against the law and should be punished. I think the better question, is why do you think such actions shouldn't be punished.

microsoft trial balloon

[mytrip]

I think this whole thing was

A) Pump and Dump SCO stock
B) A Microsoft Trial Balloon


The pump and dump worked pretty well. A bunch of SCO execs sold stock and made money at the expense of the future of the company Microsoft funded part of this lawsuit to harass linux users and see what would happen if they started suing linux users and distros as well.

You'll notice they won't even tell you which patents of theirs linux infringes now. SCO got bad PR instead of them and IBM got good PR for defending linux.

Re:microsoft trial balloon

[Kjella]

The concept of FUD is really nothing new to Microsoft of course, but this was an actual test run of "can we scare more people away from Linux with an actual IP lawsuit instead of just claiming that it is unsafe?" and it turns out the answer is "no".

That assumes a Microsoft suit would be equally toothless. SCO had some ancient non-patented (or expired) Unix rights that had extensively been licensed away which bubbled away to some baseless copyright claims and a contract suit with IBM over rights they didn't own. Microsoft is the dominant operating system and has extensively secured patents on all things in, of and related to operating systems for the last few decades. Given the very low standards of obviousness, I'd be very surprised if there wasn't something in the Linux kernel that infringed on that because it's the only sane way to do it, only Microsoft did it first. Yes, SCO was called going all-in with a 2-7 off-color hand and a short stack. To assume a lawsuit from Microsoft would play out the same is optimistic at best.

Someone bought those shares today.

[khasim]

If I'm reading Google's finance page correctly, almost 6 million shares changed hands today.

http://finance.google.com/finance?q=scox

Stock cannot sell if someone isn't buying. Who's buying?

Now I know about "short" and "long". But that's more easily described as a bet where you bet the stock will go one way and someone else bets the stock will go the opposite way. I understand about people having to buy stock to cover a mistake in a short/long. But that's an awful lot of shares being purchased.

I don't believe that there were than many people betting that it would go up again. Not with the approximately $9 million dollars it would take to have that stock last Friday.

Who's buying the stock and why are they buying it?

I can understand everyone wanting to sell it. I don't understand anyone buying almost 6 millions shares of it today.

Unless it's another scan by SCO to buy stock options from their executives. Trying to empty the company's coffers before Novell gets its cut or IBM beats them.

Re:Someone bought those shares today.

[Chris Burke]

Now I know about "short" and "long". But that's more easily described as a bet where you bet the stock will go one way and someone else bets the stock will go the opposite way. I understand about people having to buy stock to cover a mistake in a short/long. But that's an awful lot of shares being purchased.

I don't know about the volume of stock being shorted, but I remember several people on /. saying that they had tried to short, only to find that there were no shares available. I wouldn't be surprised to find out that a lot of the volume today was shareholders cutting their losses and shorters covering their shorts and making a killing. Certainly I can't think of any other reason why somebody would be buying the stock today. Of course outside the short-sellers there aren't all that many people anxious to buy SCOX, that's why the price plummeted. The ones who did buy outright instead of covering a short are probably hoping for a dead-cat bounce that will let them make some money in the short term.

It's too bad I just wasn't in the financial position for a medium-term investment a few years back. After the initial speculation (it -was- theoretically possible that SCO's code had gotten into Linux, much like it was theoretically possible that SCO owned the copyright for UNIX), there was a lengthy period where it was clear to us geeks that SCOX had no case (when they were finally forced to produce some evidence, and came up with nothing better than a few lines from standard header files) but wouldn't have been to the majority of investors. This was also around the time their stock was riding high. This would have been a perfect time to short. Though, as I mentioned, I'm obviously not the only one who had this idea and it may have already been to late to find any shares to short.

Re:Someone bought those shares today.

[ToLu the Happy Furby]

Well there were about 2.5 million shares short, so even if they all covered that wouldn't even account for half of today's volume. Plus there's no good reason for a short to cover now--yes, there is value in taking your gains up front rather than waiting for it to drop those last 40 cents, but anyone short this stock has to recognize that SCOX is very likely only a few months from bankruptcy which would mean the stock goes to zero and they don't have to buy back their shares at all.

The more likely explanation for most of today's volume is day traders trying to make a quick buck on a suddenly liquid and highly volatile stock. Almost 6 million shares may have been traded, but my guess is that that represents a significantly lower number of shares traded back and forth multiple times.

Re:Someone bought those shares today.

[Chris Burke]

Well there were about 2.5 million shares short, so even if they all covered that wouldn't even account for half of today's volume. Plus there's no good reason for a short to cover now--yes, there is value in taking your gains up front rather than waiting for it to drop those last 40 cents, but anyone short this stock has to recognize that SCOX is very likely only a few months from bankruptcy which would mean the stock goes to zero and they don't have to buy back their shares at all.

If I understand correctly, you cannot hold shorted shares forever, you can be forced to cover. Specifically this happens when the entity from which you borrowed your shares wants to sell them; you have to give them their shares back, and that means you have to cover your short. Since anyone holding actual SCOX shares would probably want to sell them now rather than before the stock drops another 40 cents, it could very well be that all the shorts were by necessity covered too.

One thing I don't know is if you can, hypothetically, cover your short by buying the very same stock you shorted from the shareholder who wants to sell and is forcing you to cover.

Either way it's quite possible that a large portion of the volume today was shareholders selling their shares, with the buyers being shorters forced to cover for those shareholders. The image you should be getting is of a lot of money spinning in circles in a porcelain vessel making a "ker-faaaaaaaash-glug-glug-glug" noise.

Re:Someone bought those shares today.

[Rolgar]

I think it is included in the contract that when you borrow the stock, the owner you are borrowing from can force you to return it at any time so they can get their money out if they need to. Some people that were buying stock today were probably forced to by the people that they were borrowing from.

SCO Group might have been the ones buying shares today. If they have more than 50 cents cash for every share of stock, this would increase the value of the remaining outstanding shares. Example, if their were 20 million shares, and 20 million in cash, and the company bought 6 million shares, each share is basically worth a dollar if they close shop. If they buy 6 million shares at 3 million dollars, they then have 14 million shares and 17 million dollars. The value of the shares to the remaining owners is then closer to a $1.21 a share, which would be a 20% increase in the asset value of the stock. I don't know what the numbers are in this case, but many traders don't pay attention to these sorts of numbers when the stocks start falling in value.

Heard from the original founders of SCO

[Anonymous Coward]

"... SCO, which still owes Novell 95 percent of the SVRX UNIX royalties it collected from Microsoft and Sun through the SCOsource program."

I was one of the early employess (circa early 1980's), and the words of the original founders come to mind here. These were: "We'd rather owe it to you forever than cheat you out of it".

Buy at 50 cents?

[Spazmania]

What I want to know is: who is still stupid enough to buy the stock at 50 cents? Haven't they figured out yet that the next step for SCO is bankruptcy liquidation in which the stockholders get -zilch-?

SCO still in the running.

[Anonymous Coward]

I'd hate to burst your collective bubbles, but SCO is still very much in business and still remains a serious threat to the Linux community.

Although SCO doesn't own the copyrights to Unix, it does own the copyrights to its own derivative pieces and parts, and it is those derivatives which SCO is now making their claims on.

This doesn't seem to diminish the financial impact of what it owes Novell, but if SCO can successfully show that it's own copyrights are within Linux, then SCO could have substantially more value than what it owes Novell.

So! Perhaps SCO still has substantial value, but only if SCO can prove this much more limited case. The question is: are investors still willing to fund the legal case given the potential payout? It depends on the potential of victory, the amount of money that a victory is worth, and the cost of additional legal battles.

Given today's stock activity, it seems that investors have little confidence in SCO:

Odds of Victory & PotentalWinning$ seem much closer to zero.

Re:SCO still in the running.

[gvc]

None of SCO's copyight claims involve their own code. They involve "Original AT&T code." The only SCO code demonstrated to be in Linux is the stuff labeled "Copyright Caldera" immediately followed by a GPL-2 license.

Re:Woohoo

[Anonymous Coward]

The amazing thing is that having been found liable for slandering Novell's title, they're still doing it.

http://www.sco.com/company/profile.html

"SCO owns the core UNIX operating system"

Uh, no. How long do they get to keep saying things like this before they're up for contempt of court too?

Re:I'm going to buy a bunch of stocks

[Reverend528]

If you frame the stock certificates, you could probably sell them to linux geeks at far above their market value. A company did this with enron certificates a few years ago.

Re:It is a corp

[Em Adespoton]

Why do you think that they will be held accountable?

Because now that major financial backing has to be paid through to Novell, and people want a ROI. It is now painfully obvious (due to where the money was going vs. where it goes now) that something wasn't quite right with SCO.

Of course, they still might not be held accountable due to the fact that their mismanagement will result in bankruptcy and disollution of the company before anyone can actually pin anything on the company. Mr. McBride might be in serious trouble, however.

Step functions

[Michael Woodhams]

I find it interesting that since the start of 2005, the SCO stock price has pretty much followed a series of step functions, the price being very stable between abrupt adjustments:
Jan 2005 - June 2006: $4.50
June 2006 - November 2006: $2.00
November 2006 - May 2007: $1.00
May 2007 - yesterday: $1.50
Today: $0.45

I don't remember what if anything happened in June 2006. November 2006 was when most of SCO's supposed evidence against IBM was thrown out because they hadn't been specific enough. The May 2007 rally is a mystery. Today's drop is obvious.

Five year graph
One year graph
One week graph

Re:Woohoo

[jshriverWVU]

High gains potential. Their stock fluctuated and are pretty much penny stocks. IF you can ride the wave and act quickly, buy at $0.75 sell at $1.00. Since the price is so low you can get a TON of stocks. Risky, but some portfolios have some % set for risky investments in hopes of higher yield.

For example: you have $500, and buy 1 share of google stock at $450, it goes up to $475, you sell it - $10 commission you just made $15. If you took that $500, and bought 665 shares of SCOX at 0.75 a share, then sold them at $1 - $10 commission you just made $156 on the same amount of money.

The rub is days like today when they completely drop and you can lose a lot of money, whereas stocks like google stay pretty much the same.

Note: I'm not an investor, just a guy who wanted to become a broker but became a software developer instead ;)

Sad in a way

[Natales]

Don't get me wrong, these guys deserve everything that they get for their cheesy actions in the last several years against Linux. However, now, looking at their demise, I can't stop thinking how did they get there, when they were once "the rebels" against "the establishment" back in the day.

I started my career as a technical support engineer for SCO Xenix in the late 80s, back in the time where Larry Michaels was there. They had the vision and an excellent code base. I had customers running up to 16 Wyse terminals on a 286 system under Xenix running COBOL applications, and even more could be achieved with SCO UNIX on the 386...

I know this is just a nostalgic thought and that the SCO I'm referring to has nothing to do with its current incarnation. I hope this can be used as a lesson for Canonical and other very successful ventures that can really become the next best thing: don't become arrogant and forget your values and where you came from. Companies change, but at the end of the day, it's all about the people and how you contribute to make your and our lives better.

Re:Woohoo

[deadlinegrunt]

"Such as Novell would have to prove that anyone actually ever believed anything SCO claimed."

Rob Enderle can be quoted as such...

Re:money money money

[Anonymous Coward]

Why exactly would Microsoft buy a company who's liabilities dwarf its assets 10-fold?

To shred documents, of course.

Work for SCOX ?

[sodul]

I could not believe all the job openings they have:

SCO Employment - An Equal Opportunity Employer

Current Open Positions

Job Title: Senior .Net UI Engineer
Location: New Delhi, India
at least 2 years of relevant experience, no more than 4 years experience.

Job Title: Senior Java UI Engineer
Location: New Delhi, India
at least 2 years of relevant experience, no more than 4 years experience.

I'm a H1-B holder myself, so I'm used to the They took our jobs! line, but how do get senior people if they can't have more than 4 years of experience ?

Also what's with the An Equal Opportunity Employer, this is clearly "we can only affoard an indian software engineer with as little experience as possible (dirt cheap better)".