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| SCO Gets $50 Million to Do More Bad Things With |
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Thursday, October 16 2003 @ 04:40 PM EDT
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BayStar Capital has invested in SCO to the tune of $50 million. They call it a private investment transaction. I call it a "raise the value of your stock by nonsensical research reports and other tricks and then profit from the increased value of your stock", but I'm no stock guru, so I could be imagining things. Maybe it's the other way around, namely that DB knew this was in the works, and so they put out a report to try to look like they are geniuses. All I know for sure is it's a mighty funny coincidence. On the other hand, coincidences do sometimes happen.
This could explain a lot, don't you think, about recent events with the stock price, which apparently BayStar Capital was too stupid to see through? I presume this means there is now money to get from SCO when they lose in court, so Canopy guys can stop worrying about their own pile. Or at least that may be the hope. BayStar put their money on the wrong pony. But if they choose to throw money away, it's fine with me. So, let me get this straight: the 75th fastest growing company in the US according to Deloitte's Fast 500 list needed to raise some money to keep going. Hmm. Makes you wonder about the economy -- or about Deloitte's Fast 500 evaluation, eh?
Here is the press release (note original press release has been taken down, brackets around the numbers removed and the new press release put up at the new location. The old one was here and it read: The investment in SCO was structured as a private placement of non-voting Series A Convertible Preferred Shares, convertible into common equity at a fixed conversion price of [$16.93] per share, which was the average closing bid price for the Company's common stock for the five previous trading days prior to the date of closing. Upon conversion, BayStar will own an aggregate of approximately [2,953,000] shares of SCO common stock representing [17.5%] of the company's outstanding shares. The press release reads like this: The SCO Group Closes $50 Million Equity Financing
Thursday October 16, 4:31 pm ET
$50 Million Private Investment Transaction Led by BayStar Capital Provides SCO With Funding for Future Software Development, SCOx Web Services Partnerships And Acquisitions, Future Licensing Opportunities and the Protection of the Company's Intellectual Property Assets
LINDON, Utah, Oct. 16 /PRNewswire-FirstCall/ -- The SCO® Group (SCO) (Nasdaq: SCOX - News), the owner of the UNIX operating system, today announced it has received a $50 million private investment led by BayStar Capital, an investment fund that is a leader in providing negotiated private equity placements in publicly traded companies. The investment in SCO was structured as a private placement of non-voting Series A Convertible Preferred Shares, convertible into common equity at a fixed conversion price of [$16.93] per share, which was the average closing bid price for the Company's common stock for the five previous trading days prior to the date of closing. Upon conversion, BayStar will own an aggregate of approximately [2,953,000] shares of SCO common stock representing [17.5%] of the company's outstanding shares.
The net proceeds from the private placement, combined with the Company's cash balance reported for its third quarter ended July 31, 2003, will provide the Company with a cash position of approximately [$61.0] million. The increase in cash will significantly enhance the overall financial strength of SCO while providing substantial additional funding for business objectives including future UNIX and SCOx Web Services software development, new strategic partnerships, and protection of the Company's UNIX intellectual property and related programs.
"The momentum in the marketplace continues to shift in SCO's direction," said Darl McBride, president and CEO, The SCO Group. "Over recent months, we have made significant strides forward in our on-going effort to protect and enforce the Company's intellectual property rights through SCOsource. During the same period, we have been steadily strengthening our core operating business, and in the coming weeks, we look forward to providing the industry and Wall Street with additional details on our plans and initiatives. Now, with a $50 million investment from BayStar, we believe we have secured the capital necessary to fund all aspects of the long term growth of this Company."
"BayStar Capital looks to invest in growth-oriented firms with strong management, substantial market opportunity and solid, comprehensive business plans, and we believe that all of those fundamentals are in place for SCO to succeed," said Lawrence Goldfarb, General Partner, BayStar Capital. "SCO owns the most predominant UNIX software assets in the I.T. industry, has a 20 year history of providing trusted software solutions to end users around the globe, and an aggressive and seasoned management team focused on generating profitable growth."
SCO will hold a teleconference to address this investment on Friday, October 17 at 12:00 p.m. Eastern time. Participants should dial in 10 minutes prior to the start of the call and dial toll-free 1-800-811-8824 and use the confirmation code 690025. International callers should use the toll number +1-913-981-4903.
The securities sold in this private placement have not been registered under the Securities Act of 1933 and may not be offered or sold in the United State in the absence of an effective registration statement or exemption from registration requirements. The Company has agreed to file a resale registration statement on Form S-3 within 30 days after the closing of the transaction for the purposes of registering the shares of common stock underlying the shares of Series A preferred stock acquired by BayStar. After we read it, it's time to research BayStar, natch, starting here and here. Here's what BayStar says about itself: BayStar Capital is a private equity crossover fund that makes direct investments in late stage privately held companies and small to medium capitalization publicly traded companies across all sectors. The firm is a leader in arranging Private Investment in Public Equity (PIPE) transactions that provide capital to companies seeking to reduce time to market, less stock dilution and lower market risk. New feature: I've put up an IBM Timeline as a permanent page. It has everything that has happened so far and a list of future dates to watch for. There is a new link on the left side of the page "IBM Timeline". You asked for it. You got it. I'll do one on Red Hat as I can. Until the motion to dismiss is ruled on, and that should be in about a month or so, there is no timeline, except for the motions themselves. Forbes' Dan Lyons has felt compelled to respond to the reaction he caused by his article on "Linux' Hit Men", which you can read here and I'd say it's as close to an apology as we're going to get. I'd say the letters were effective. Congratulations, everyone. Looks like his boss got our message. Here's a snip of Lyons' article: My article simply points out that the paradoxical effect of these "enforcement actions" (FSF's term) may be to impede the adoption of Linux. By demanding that licensees publish source code for their own "derivative work" code (in addition to the Linux they're using) the FSF is, in effect, charging a royalty that approaches 100% of the value of the licensee's product.
Yes, the FSF is entitled to do this. But some people question the wisdom of this policy. They think it will scare off commercial software and hardware developers who want to use open source software but don't want to destroy the value of their product and don't want get into a hassle like the one Cisco Systems (nasdaq: CSCO - news - people ) and Broadcom (nasdaq: BRCM - news - people ) are having. Even within the open source world there is a difference of opinion on this issue.
He asks a question which I'd like to answer. He says enforcement actions regarding the GPL will cause corporations to stay away from GPL code, and he asks if this is good for Linux. The answer is yes. We would like companies like SCO and other would-be thieves to stay away from GPL code and give up their dreams of co-opting our code and "monetizing" it for themselves. We believe this would be very good for Linux. What Mr. Lyons does not comprehend, or SCO either, for that matter, is Linux doesn't need corporations. Corporations need Linux. That's the part Mr. Skiba of DB forgot to put in his equation. I have a question for Mr. Lyons in return: Does he own any SCO stock? What are the guidelines for journalists at Forbes on such matters? Shouldn't journalists and analysts have to disclose *any* interest they might personally have in a story and if they have a strong interest recuse themselves, the way judges do?
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| Authored by: Anonymous on Thursday, October 16 2003 @ 05:05 PM EDT |
| SCOX down in the AH, not good... [ Reply to This | # ]
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| Authored by: geoff lane on Thursday, October 16 2003 @ 05:10 PM EDT |
Something has been nagging me about SCOs tactics and finally
I've
remembered. In the Halloween
II
document written by Microsofts Vinod Valloppillil and Josh Cohen (dated
Aug
11, 1998) there is a section entitled Process
Vulnerabilities which contains...
The Linux community is
very willing to copy features from
other OS's if it will serve their needs.
Consequently, there is the very
real long term threat that as MS expends the
development dollars to create a
bevy of new features in NT, Linux will simply
cherry pick the best features
an incorporate them into their
codebase.
Of course, as NT source is not available, the
"Linux community" would
actually create work-a-likes to NT features (excluding
the Windows GUI I
would guess.) But is there anything found in Windows we
now see in
Linux? Working from the features that SCO claim to infinge their
"IP" we
have...
NUMA: (There is a good description of what NUMA is
and the early
developments, including contributions from SCO here) Microsoft has an interest
in NUMA..
Continuing its anti-Unix drive, Microsoft
revealed at its WinHEC
conference last week in Seattle the planned introduction
later in 2002 of
NUMA (Nonuniform Memory Access) technology for its forthcoming
Windows .Net
Enterprise Server and Windows .Net Datacenter Server -- its
flagship
high-end server operating systems.
NUMA, thus far the domain of
high-end Unix servers, breaks the I/O
bottleneck by enabling faster
communication between distributed memory in a
multiprocessor server than
standard I/O, thereby increasing the platform's
performance and stability.
Microsoft officials report that the move
reflects the Windows .Net architecture
road map to support NUMA.
JFS: (Journaling File
System) This is important because such a
filesystem can survive a system crash
much better than older un*x
filesystems. For a 300Gb filesystem this can mean
the difference between a
30 minute reboot and a 30 second reboot. There are a
number of
independently developed filesystems with this feature, JFS is
IBMs.
JFS has a twisted
history.
Orginally developed for AIX, it was mostly re-implemented for
OS/2. IBM
released the code for a Linux
version. It seems that the
code base used to develop the GPL'ed version was
from OS/2, rather than AIX.
Microsoft doesn't seem to have any overt
interest in JFS since it
abandoned OS/2 development (at least their site search
engine doesn't return
any information.)
SMP: This allows a computer
to run two or more CPUs at the same
time and share running processes between
them. This helps to remove the CPU
limitations on high level servers. It is
especially important
where a large number of light weight processes
(threads) are used - for
example in Java programs. It's possible to buy
hardware from a number of
suppliers (IBM, SGI, Sun) that allow over 100 CPUs to
act together to run a
large problem. This ability to run huge numbers of CPUs
give un*x like
operating systems a huge advantage over current Windows products.
It would
be to Microsofts advantage if other companies' SMP technology were
tied up
in legal knots.
In Halloween
III we
see the statement Unless Linux violates IP rights, it will
fail to deliver
innovation over the long run..
So, did SCO make their claims after
reading the Halloween II and III
documents?
[ Reply to This | # ]
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| Authored by: krow on Thursday, October 16 2003 @ 05:13 PM EDT |
This explains a lot, don't you think, about recent events with
the stock price, which apparently BayStar Capital was too stupid to see
through?
Not necessarily. If they are able to move those 3mil
shares above ~$16.93, they make money. All they need to believe is that SCOX
has the muscle to keep the price up long enough for them to find bag
holders.Cheers,
Craig
---
Corollary to Clarke's Third Law:
Any technology distinguishable from magic is insufficiently advanced. [ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 05:16 PM EDT |
Link to the press release says:
Removed
This
article has been removed at the request of the news provider, PR
Newswire.
I wonder why.
Also, the IBM timeline is
great, but one of the future deadlines either has the wrong year, or they are
out of order.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 05:30 PM EDT |
I feel like we have just entered the Twilight Zone. Things have gone from
infuriating to totally absurd. [ Reply to This | # ]
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| Authored by: n0ano on Thursday, October 16 2003 @ 05:53 PM EDT |
There is actually one bit of good news in this. This will potentially wreck
Daryl McBride's plans for a big stock pay out. Remember that he needs 4
consecutive profitable quarters. The expectation was that Sun & MS would
provide that `profit' through the licenses they were buying. The only reason
for Sun & MS to funnel that cash into SCO was to keep the company afloat to
keep up the FUD campaign. Now that SCO has all of this cash there is no need
for Sun & MS to keep up their payments. I expect that this quarter SCO will
announce spectacular results but next quarter will look pretty grim.
---
--
"Censeo Toto nos in Kansa esse decisse." - D. Gale[ Reply to This | # ]
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| Authored by: midav on Thursday, October 16 2003 @ 05:55 PM EDT |
| As I understand SCO received some priviledged stock from BS
Capital, which
they will convert back in exchange for their own
stock. Meaning, they can
make money on it only if they are
'shorting' it. I.e. they can buy back
outstanding shares cheaper
then $16.93. And even is this case they will
not make $50 mil but
only the the shorting margin. Is that what they are
doing? Do
I understand correctly that these $50 mil are not directly
convertible to cash? [ Reply to This | # ]
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| Authored by: J.F. on Thursday, October 16 2003 @ 06:00 PM EDT |
The SCO® Group (SCO) (Nasdaq: SCOX - News), the owner of the UNIX
operating system, today announced it has received a $50 million private
investment led by BayStar Capital
Gee, now they own UNIX
again. Who was responsible for that? SCOG or the media? If the media, maybe a
nice open letter to the media explaining what SCOG does and does not own is in
order.
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| Authored by: Anonymous on Thursday, October 16 2003 @ 06:02 PM EDT |
Based on the $16.93 value as an average of the last 5 closes, that can only
apply to today. (Though, I get an average of $16.99). It appears that the
press release was set to go out as soon as the bell rang and they could
calculate the closing price. (In fact, the only difference between the original
PR release that disappeared and the new one was the removal of the brackets
around the numbers.)
So, this deal was probably already in the can and defined the common share value
based on the 5 days through Thursday's close. So, that puts the DB Skiba pump
in interesting light. Was this SCO getting the share price up so the average is
higher so that they owe fewer shares? Or as some on the SCOX Yahoo! board
speculated could it have been BayStar getting the price/volume up so they could
short enough shares to hedge their bet?
All in all very interesting.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 06:21 PM EDT |
A company "arbing" a convertible bond is very common. They simply
short stock and buy the convert. It's a round about way of (SCO) selling
stock. The hedge ratio would probably be around 70%. This may explain the
depressed price of last week (in the 14 to 16 area).
Also, I would not read too much into DB Alex Brown being co-lead on the Canopy
issues. This is also very common.[ Reply to This | # ]
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| Authored by: Sunny Penguin on Thursday, October 16 2003 @ 06:22 PM EDT |
| Here is another DotBomb funded by
BayStar
This link is to www.RedHerring.com
---
Vescere bracis meis. [ Reply to This | # ]
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| Authored by: Nick on Thursday, October 16 2003 @ 06:23 PM EDT |
| "BayStar Capital looks to invest in growth-oriented firms with strong
management, substantial market opportunity and solid, comprehensive
business
plans, and we believe that all of those fundamentals are in
place for SCO to
succeed,"
Strong management? Comprehensive business plans?! My jaw
just
dropped. I'm just stunned at this Orwellian paragraph. What's the point
of running a business honestly when FUD gets rewarded so easily? (No,
I'm not
really asking, just making a point that if you can get $50 million
that easily with nothing backing it up...I'm just shaking my
head). [ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 06:27 PM EDT |
...said Lawrence Goldfarb, General Partner, BayStar Capital. "SCO owns the
most predominant UNIX software assets in the I.T. industry, has a 20 year
history of providing trusted software solutions to end users around the globe,
and an aggressive and seasoned management team focused on generating profitable
growth."
20 years huh? If that's the case I've got some ocean-front
property in Arizona you might be interested in.
Somebody didn't explain the
difference between "old" SCO and "new" SCOG; that the current entity known as
SCO, until this past April, was Caldera, d/b/a SCO.
Which makes me
wonder... has anybody at Tarentella offered up any comments about the case? I'd
like to see them.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 06:30 PM EDT |
The investment community and the computer community seem to be going in exactly
opposite directions re: SCO. See this for the computer industry:
http://searchenterpriselinux.techtarget.com/originalContent/0,289142,sid39_gci93
2385,00.html
"They clearly looked at the cost of pursuing these invoices and saw that
the cost was not worth the gain," said Forrester principal analyst Ted
Schadler. "It's clear SCO is reaching for IP validation. They do own
[Unix] IP. The question is, do they have the ability to exert control over
Linux? The broad consensus is they can't. The court of public opinion has made
its decision."
[ Reply to This | # ]
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| Authored by: SST on Thursday, October 16 2003 @ 06:48 PM EDT |
Important point:
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1600684464&a
mp;tid=cald&sid=1600684464&mid=52819
(not my post)[ Reply to This | # ]
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- Lyons' Response - Authored by: Anonymous on Thursday, October 16 2003 @ 07:10 PM EDT
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| Authored by: arch_dude on Thursday, October 16 2003 @ 06:51 PM EDT |
1) where should I post off-topic questions? It seems we are simply using the
latest article.
2) I think there is a lot of confusion about the IBM contract and the letter
ammendment. Here is my understanding. Is it correct?
--IBM received a licence from AT&T to use UNIX SVR4. This is the
"AIX licence." This licence is modified by a letter agreement known
as "ammendment X" that clarifies the status of IBM-written code in a
derivative work.
--Sequent received a license from AT&T to use UNIX SVR4. This is the
"Dynix/PTX license." There is no evidence that this license was
explititly modified by any equivalent letter ammendment between Sequent and
AT&T or any successor.
--IBM purchased Sequent.
--Work done by Sequent on Dynix/PTX prior to the IBM purchase, including
NUMA, is governed by the "Dynix/PTX license."
--Work done by IBM on AIX prior to the IBM purchase of Sequent is governed
by the "AIX license."
--Work done by IBM on AIX subsequent to the IBM purchase of Sequent is
governed by the "AIX license." (?)
--Work done by IBM(Sequent) on Dynix/PTX after the purchase of Sequent by
IBM is subject to the "Dynix/PTX license." (??)
3) The "Dynix/PTX license" (and indeed all AT&T SVR4 licenses)
is said to have been clarified by a 1986 open letter to all licencees. I have
never seen a copy of this letter on GROKLAW. This is not the 1985 letter from
AT&T to IBM mentioned above. The 1986 letter is said to define the
ownership of licensee-written work in substantially the same way the 1985 IBM
letter does.
3a) Does anyone have a copy of the 1986 letter?
3b) Since it is not an explicit part of any contract, what is the legal
standing of the 1986 letter?
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| Authored by: Anonymous on Thursday, October 16 2003 @ 06:51 PM EDT |
If there was logic to the market, IMHO this should lower the share price.
SCOX's management has just said, in a big way, that their stock is worth $16.9x
per share. That's lower than the current price.
Existing shareholders are presumably diluted too.
One other interesting point in the press release. SCO owns the UNIX operating
system is back (this disappeared for a while)
"LINDON, Utah, Oct. 16 /PRNewswire-FirstCall/ -- The SCO® Group (SCO)
(Nasdaq: SCOX - News), the owner of the UNIX operating system, "
How they attribute the UNIX trademark is also interesting:
"UNIX is used pursuant to an exclusive license with The Open Group and is
a registered trademark of The Open Group in the United States and other
countries. "[ Reply to This | # ]
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| Authored by: Grim Reaper on Thursday, October 16 2003 @ 06:52 PM EDT |
Here's an interesting article about BayStar:
www.thedeal.com/special/tech_aftermath/feat.html
Something really rotten is in the works. I'm wondering if this
"investment" may in fact be a crafty way for SCO to funnel money out
through BayStar.
---
For the love of money is a root of all kinds of evil (1 Timothy 6:10); R.I.P. -
SCO Group, 2005/08/29[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 07:04 PM EDT |
There is something odd about this deal. BayStar is getting Preferred Stock that
is _convertable_ to common at 16.93/share. If they convert 2,953,000 shares, it
will cost fifty million. So did SCO get anything out of this deal now? Or did
BayStar pay $50 million for the right to pay another 50 million to convert?[ Reply to This | # ]
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| Authored by: Lazarus on Thursday, October 16 2003 @ 07:24 PM EDT |
Ok, BayStar is a venture capitol outfit.
But where did they get the $50 million they invested in SCO?
Tin foil hat time kiddies, but let Uncle Lazarus talk...
The explanation we like the most is that it's Sun/Microsoft/etc behind this,
channeling money through a 3rd party so that they can keep their hands clean.
And that makes sense, after all, Microsoft certainly doesn't want more
difficulties with the Federal Government. But it doesn't feel right, for some
reason.
I can't see it being Sun, not with their current financial difficulties.
So who does that leave?
The simple answer: Canopy.
Think about it; if Canopy, via it's myriad shell companies, put together a $50+
million package, and got BayStar to invest that money where they wanted, it
looks like the "market at work, recognizing a 'good' investment
opportunity."
What does BayStar get out of this? Anything that is a difference between what
Canopy gave them, and the 50 mill. They would also get anything they ended up
selling the shares for. And if that's at a loss, which we all expect it will
be, then they get a tax write off as well.
The last step in this process would be SCO using the 50 mill to buy other Canopy
companies, thus getting the money back where it started.
And to me, that plays a lot better than MS tossing more money down this rathole.[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 07:51 PM EDT |
| Today I attended SCO's City to City meeting in St Louis. Read my report here.
Scott McKellar [ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 08:05 PM EDT |
For reasons I won't go into, I was starting to wonder if SCO might be running
into difficulties with their cash position. I guess we would find out in future
SEC filings if this were the case.
IMHO, the RH suit and IBM countersuit were unlikely to be in SCO's already (as
far as amounts stated publicly) threadbare budget for litigation, and SCO were
likely to pay for these. The discovery requests (which SCO seems to have only
prepared the SysV licenses, UNIX and LInux source codes) would also be
expensive, and I can not concieve of SCO not paying for these.
IMHO while in the short-term this gives SCO more cash to play with (an important
point - is that no new money is coming from Canopy - think about it - for
example as alternative to issuing new stock, Canopy could have loaned SCO money
as they have done in the past).
IMHO the Baystar investment is not good news for the generality of SCO
investors, who are looking at serious dilution. Obviously SCO will try to
present this differently.
The Royce and Baystar holdings are also a sword of damocles above the stock. If
either gets nervous and wants to bail, the stock will tank. The only way for
these companies to offload their holds is over a very prolonged period of time.
If the cases turn sour quickly, and Royce/Baystar sell, the stock will tank
harder than it could have when Canopy was the big investor (as Canopy would
presumably hold).
[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 08:36 PM EDT |
Yahoo reprints the SearchEnterpriseLinux.com article.
http://story.news.yahoo.com/news?tmpl=story&cid=1632&ncid=1209&e=10&
amp;u=/techtarget/20031016/tc_techtarget/932385
gotta love the first line:
"Facing wholesale rejection of its demands for payment for Unix (news -
web sites) licenses from corporate Linux (news - web sites) users, the SCO Group
announced it would not invoice enterprises using the operating system."
Goes exactly counter to the SCO claim that they are not invoicing because enough
corps are buying licenses.[ Reply to This | # ]
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| Authored by: kevin lyda on Thursday, October 16 2003 @ 09:05 PM EDT |
| (btw, i don't have an email address for daniel lyons - perhaps a subscriber to
forbes or someone like that could pass this along to him. i'd be curious what
his opinion is on the confusion caused by the multitude of microsoft's ever
changing eula's and how that affects companies.)
Of course Microsoft
Corporation is entitled to enforce its
EULA, just as other organizations are
entitled to enforce their
copyrights and licenses. My article simply points out
that the
paradoxical effect of these "enforcement actions" (Microsoft's term) may be to
impede the
adoption of Windows. By demanding that licensees sometimes pay for one
copy of
Windows twice Microsoft is, in effect, charging a royalty
that approaches
100% of the value of their own product.
Yes, Microsoft is entitled to do
this. But some people
question the wisdom of this policy. They think it will
scare
off commercial software and hardware developers who want to use
closed
source software but don't want to destroy the value of
their product and don't
want get into a hassle like the one the city
of Virginia Beach and Ernie
Ball have had. Even within the open source world there is a
difference
of opinion on this issue.
As many readers point out, if a company
doesn't like the Microsoft EULA, they
shouldn't use Windows. That's fair enough.
No doubt many will stay away.
But is that good for Windows?
Finally, some
readers point out that by charging multiple times for a single instance, and by
pursuing enforcement actions and making threats, Microsoft
is behaving like the
mafia would. On this point I agree completely.
[ Reply to This | # ]
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| Authored by: ra on Thursday, October 16 2003 @ 09:25 PM EDT |
| Sorry if this is a repeat.
Stowell:
"If we
continue to have the progress we are having now, I don't envision us ever having
to send invoices," Stowell said. "I'm not surprised [some companies have stepped
forward and bought licenses]. We're satisfied with the pace of the program and
satisfied with the number of Linux users who have taken out
licenses."
Forrester principal analyst Ted Schadler:
"It's clear SCO is
reaching for IP validation. They do own [Unix] IP. The question is, do they have
the ability to exert control over Linux? The broad consensus is they can't. The
court of public opinion has made its decision."
"They looked at their
business, their stock position, their investors, their exit strategy and decided
they could make more money this way. The fact is, they're not scaring anybody.
We feel like this is starting to run out of gas. IT managers and CIOs have not
been confused."
Congratulations Groklaw and others. [ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 09:32 PM EDT |
My personal expectation for a long time has been SCO's higest stock price, to
chronologically coincide with the imminent collapse of their legal position.
Whether they have a case or not (personally I don't believe that they do), it
is IMHO indisputable that their stock price has been raised by a result of their
litigation/licensing strategy.
Once you have gains in stock price, it is logical that they would want to try to
convert them into real money.
This new deal could be just such an event.
Personally I think we are not at the end, not at the beginning, not even at the
end of the beginning, but rather at the beginning of the end.
IMHO, it will all be over sooner than most seem to think.[ Reply to This | # ]
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| Authored by: D. on Thursday, October 16 2003 @ 09:38 PM EDT |
From McB's blurb on the SCOG site:
...
A technology industry veteran, McBride has 19 years of executive management and
leadership experience. Before joining SCO, McBride was the president of Franklin
Covey's online planning business. Prior to that, McBride has been the CEO of
PointServe, a workforce optimization software company; and the founder,
chairman, and CEO of SBI and Company, a professional services company. While at
the helm of these companies, McBride was responsible for raising more than $100
million in venture capital.
...
Note the last sentence.
D.
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| Authored by: be2weenthelines on Thursday, October 16 2003 @ 09:38 PM EDT |
I used to work for a hedge fund so I know a little about convertibles and PIPEs.
SCO (Caldera) should have to file an S1 for these securities, but I haven't
been able to find it yet, so we can't be sure of the details. There are a lot
of potential bells and whistles with potentially dramatic implications for who
will end up owning the company and its stock price.
Basics:
1) these convertible preferreds are basically call options
on SCO stock. I know that many of you are not familiar with option valuation,
but in simple terms these are worth much more than $50 million. Given SCO
volatility, I would guess these are worth at least $75 million, but I can't be
precise (or sure) without knowing the terms more exactly. (I used to price
these things for a living.) SCO probably does not have the sophistication to
price these, but Canopy might. So, right off the bat, current shareholders just
gave away $25 million dollars (imho, probably more) without knowing it.
2) BayStar is almost certainly not making a buy and hold investment. They will
almost certainly hedge their investment by selling SCO stock short in exactly
the same way a hedge fund would hedge a call option. This could have two
impacts on the stock price:
a) all that selling should put a lot of downward pressure on the stock price.
b) BayStar probably is a lot better at borrowing stock than us retail investors,
so stock should rapidly become impossible to borrow, with great potential for
loan recalls to those smaller investors already short, meaning a short squeeze,
which could put great upward pressure on the stock. I realise these are
opposing forces and I have no idea how it plays out, except that I expect
volatility to go through the roof, and BayStar is in the perfect position to
profit from that volatility. (The value of their call option increases as
volatility increases.)
3) One of the bells and whistles these may have is a variable conversion price,
along with the fixed 16.93 conversion price we know of. (Aside: its typical for
the fixed conversion price to be set off the trailing 5 day average - nothing
unusual there.) If they do, it typically works so that as the price of SCO
falls, the conversion price also falls, i.e BayStar's $50million investment
converts into more than the initial (roughly) 3 million shares. e.g. if SCO's
price falls from $20 to $10, BayStars conversion price falls from $16.93 to
$8.46 so they can now convert into (roughly) 6 million shares. The point is to
protect the value of their investment: 3 million shares at 16.93 ~= $50million.
6 million shares at 8.46 ~= $50 million. The implication for current
shareholders is that as the stock price falls, the dilution increases. 3
million shares ~= 20% dilution. 6 million shares ~= 40% dilution. Often there
is no limit to how low the conversion price can go and dilution can be total:
BayStar may end up owning the entire company. *If* (and I emphasize if) the
preferreds are structured this way, they are commonly called "Death
Spirals".
Brief summary: current shareholders just took a big hit (and possibly got
completely screwed). Current shorts are in great danger of being squeezed.
P.S. Current shareholders include McBride et al. I don't know if he (or they)
realize that...
be2[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 09:40 PM EDT |
The Fast 500 list is statistics (set criteria, pull info from the database, run
the spreadsheet, cut the list to 500 and publish). The "merits" of
how the company got a certain result are not relevant and there is no
"disqualification" process.
Of course there are lies, darned lies and statistics and D&T can
"tweak" the criteria to show whatever they want. Considering that
SCOX is not that high up I would think they probably "tweaked" it
for other customers and SCOX just got lucky that D&T, when they designed
this list, had a company in mind with characteristics more or less close to
SCOX. There is no much use in beating D&T.
PJ, you're setting an example of self-control in so many occasions, don't
forget it all of a sudden :)[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 10:17 PM EDT |
The SCO Group didn't have a case before the VC deal, and they still don't
after the VC deal: no change. The money coming in is not buying them a better
case. A pig with a pearl necklace is still a pig, and the SCO Group is one pig
that is about to be turned into pork.
The SCO Group claims they got $50 mil from Baystar: it is unclear to me whether
they are getting this money in one shot or whether this money is coming in
slices, where each slice is contingent upon milestones being reached. In
general, VC's can be worse than loan sharks in that they compel the investee to
promise very high returns and then hold the investee's feet to the fire.
At present, the SCO Group has no visible earnings to show either from its
Unixware business or from its "licensing" business. I expect that
Darl McBride is not going to sleep very well from now on with those VC's on his
back putting the pressure to show something positive, but that's his problem.
Once the SEC investigation start, the timing between the DB analysis and the Bay
Star announcement would be an interesting place to look at. The possible links
between Canopy, Bay Star and DB would be another place of interest worth looking
at.[ Reply to This | # ]
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| Authored by: Scott_Lazar on Thursday, October 16 2003 @ 10:32 PM EDT |
TSG will be further explaining BayStar's investment via a teleconference Friday
at noon (EST):
http://biz.yahoo.com/prnews/031016/lath150_1.html
Come one, come all to the latest dog and pony show!
Oh, and btw, in the press release they make a couple of claims, which I wonder
about their numbers:
"SCO has a worldwide network of more than 11,000 resellers and 4,000
developers."
I wonder what these numbers compare to say, a year ago at this time?
Scott
---
LINUX - Visibly superior![ Reply to This | # ]
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| Authored by: ellson on Thursday, October 16 2003 @ 11:20 PM EDT |
A Google search for: "BayState Canopy" produces a single hit to:
<a href="http://www.highlandergroup.com/">The Highlander
Group</a>, which offers: "financial services: mergers &
aquisitions, private equity & venture capital placement."
Their <a href="http://www.highlandergroup.com/DataBase.htm">
database</a> also contains: "DB eVentures"
which, according to another Google search, is:
"DB eVentures is the strategic private equity technology investment arm of
Deutsche Bank."
Just coincidence???[ Reply to This | # ]
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| Authored by: Anonymous on Thursday, October 16 2003 @ 11:27 PM EDT |
| An advertisement on the Dan Lyons apology page pointed me to the BSA's "piracy
tip" web form. Anyone gutsy enough to
report SCO as a distributor of unlicensed sofware, for distributing Linux
without a valid license? After all, they are not fulfilling its terms, not to
mention they've publically declared the GPL flawed. [ Reply to This | # ]
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| Authored by: Anonymous on Friday, October 17 2003 @ 07:54 AM EDT |
English folk saying: "A fool and his money are soon parted". It is
amazing how much the hard won wisdom of the dead is lost on the living.[ Reply to This | # ]
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| Authored by: Grim Reaper on Friday, October 17 2003 @ 08:00 AM EDT |
This is interesting (for Yahoo! SCOX board). Maybe someone can look into this:
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1600684464&a
mp;tid=cald&sid=1600684464&mid=53043
---
For the love of money is a root of all kinds of evil (1 Timothy 6:10); R.I.P. -
SCO Group, 2005/08/29[ Reply to This | # ]
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| Authored by: Anonymous on Friday, October 17 2003 @ 05:30 PM EDT |
http://bankrupt.com/CAR_Public/000406.MBX
http://bankrupt.com/CAR_Public/000515.MBX
Search for Baystar in these documents.
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