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SCO Raises $10 Million in Private Placement
Wednesday, November 30 2005 @ 06:47 PM EST

See what happens when I go out shopping? SCO announces it has closed a $10 million private placement of 2,852,449 shares of common stock to "existing SCO institutional shareholders" and a member of the board, true believers to their dying day. What, nobody new wants to buy this stock, or what?

You didn't really think they'd be allowed to go bankrupt, did you? I checked to see if they'd filed anything with the SEC, to try to fill in some blanks, but I find nothing yet. There is only the S-1 Recission Offer filed earlier this month.

Here's the press release:

*********************

The SCO Group Closes $10 Million Private Placement to Institutional Investors

LINDON, Utah, Nov 30, 2005 /PRNewswire-FirstCall via COMTEX News Network/ -- The SCO Group, Inc. ("SCO") (Nasdaq: SCOX), a leading provider of UNIX(R) software technology for distributed, embedded and network-based systems, today announced the completion of a private placement of 2,852,449 shares of common stock to existing SCO institutional shareholders and a member of the company's board of directors. The shares were sold to institutional investors at $3.50 per share and to the board member at $3.92 per share. No special warrants or rights were issued in connection with the private placement. The proceeds should ensure that the company has adequate funding to pursue its existing business strategies, including the resolution of the company's existing legal proceedings. Syntax Partners LLC provided advisory assistance to the company in connection with the financing.

"Our current strategies have continued to focus on creating innovative mobile technologies for new customers, delivering reliable UNIX products for existing customers, and protecting our intellectual property rights for all company stakeholders," said Darl McBride, president and chief executive officer at The SCO Group. "This added investment is a vote of confidence by our existing investors that will bolster our efforts over the long-term to succeed in the marketplace with our products and continue protecting our intellectual property."

Forward-Looking Statements

The statements contained in this news release regarding the adequacy of SCO's capital following the equity investment that are not historical fact are forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks and uncertainties. A variety of important factors could cause actual future results and trends to differ materially from historical results or those projected in any forward-looking statements. These factors include, but are not limited to, unexpected expenses, higher than anticipated expenses, lower than anticipated revenue and other factors more fully discussed in SCO's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date on which such statements are made, and SCO undertakes no obligation to update such statements to reflect events or circumstances arising after such date.

About SCO

The SCO Group (Nasdaq: SCOX - News) is a leading provider of software technology for distributed, embedded and network-based systems, offering SCO OpenServer for small to medium business and UnixWare for enterprise applications and digital network services. SCO's highly innovative and reliable solutions help millions of customers grow their businesses everyday, from SCO OpenServer on main street to UnixWare on Wall Street, and beyond. SCO owns the core UNIX operating system, originally developed by AT&T/Bell Labs and is the exclusive licensor to Unix-based system software providers.

Headquartered in Lindon, Utah, SCO has a worldwide network of thousands of resellers and developers. SCO Global Services provides reliable localized support and services to partners and customers. For more information on SCO products and services, visit www.sco.com.

SCO, SCO OpenServer and the associated SCO logo, are trademarks or registered trademarks of The SCO Group, Inc. in the U.S. and other countries. UNIX and UnixWare are registered trademarks of The Open Group. All other brand or product names are or may be trademarks of, and are used to identify products or services of, their respective owners.


  


SCO Raises $10 Million in Private Placement | 176 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections (if any) Go Here Please.
Authored by: Kevin on Wednesday, November 30 2005 @ 06:52 PM EST
I appear to be the first poster - corrections here please.

---
73 de ke9tv/2, Kevin (P.S. My surname is not McBride!)

[ Reply to This | # ]

OT Here, Please
Authored by: overshoot on Wednesday, November 30 2005 @ 06:53 PM EST
It's always nice when you make links clickable -- instructions at bottom of
comment form.

[ Reply to This | # ]

true believers
Authored by: Anonymous on Wednesday, November 30 2005 @ 06:57 PM EST
They must have read Groklaw to have such strong confidence in SCO's case.

[ Reply to This | # ]

SCO Raises $10 Million in Private Placement
Authored by: Anonymous on Wednesday, November 30 2005 @ 07:11 PM EST
Does this mean that Novell can have those extra funds put in escrow if their
injunction succeeds?

[ Reply to This | # ]

"Leading"?
Authored by: Dr.Dubious DDQ on Wednesday, November 30 2005 @ 07:11 PM EST
"[...]a leading provider of software technology[...]"

Is it just me, or does "leading" have the special meaning of "posesses a typically unimaginative marketing department"?

Is there anybody who ISN'T "leading" or "a leading provider" or "an industry leader"?

[ Reply to This | # ]

  • "Leading"? - Authored by: Anonymous on Wednesday, November 30 2005 @ 07:16 PM EST
  • "Leading"? - Authored by: Jude on Wednesday, November 30 2005 @ 07:47 PM EST
  • Yeah, "Leading" - Authored by: Anonymous on Wednesday, November 30 2005 @ 11:02 PM EST
    • Yeah, "Leading" - Authored by: Anonymous on Thursday, December 01 2005 @ 12:58 AM EST
  • "Leading"? - Authored by: Anonymous on Thursday, December 01 2005 @ 02:52 AM EST
    • "Leading"? - Authored by: wHo on Thursday, December 01 2005 @ 03:48 AM EST
    • Exclusive? - Authored by: rocky on Thursday, December 01 2005 @ 11:03 AM EST
  • Obligatory Python Reference - Authored by: Rudisaurus on Thursday, December 01 2005 @ 05:30 AM EST
  • "Leading"? - Authored by: Anonymous on Thursday, December 01 2005 @ 07:21 AM EST
  • "Leading"? - Authored by: Dark on Thursday, December 01 2005 @ 11:00 AM EST
  • "Leading"? - Authored by: frk3 on Thursday, December 01 2005 @ 01:22 PM EST
  • "Leading"? - Authored by: archonix on Thursday, December 01 2005 @ 07:31 PM EST
SCO Raises $10 Million in Private Placement
Authored by: ChrisP on Wednesday, November 30 2005 @ 07:16 PM EST
That's 39115 shares at 3.92 to the director for $153330.80 and 2813334 shares at
3.50 to the institutions for $9846669.00.

I would guess that the director's investment was needed to make the institutions
feel more comfortable about investing nearly £10m at a c10% discount.

---
SCO^WM$^WIBM^W, oh bother, no-one paid me to say this.

[ Reply to This | # ]

Private placement -- is there a LEGITIMATE reason for doing this?
Authored by: dwheeler on Wednesday, November 30 2005 @ 07:17 PM EST
You know, if you believe the standard propaganda about exchanges, no private placement should ever take place. The whole point of exchanges are to allow people to buy and sell in freedom, which should quickly determine the true market value of a stock. If company X needs money, they usually try to sell it via an exchange... otherwise either buyer or seller would avoid the transaction (because it wouldn't be the best deal for them, depending on the price). So why would they bother with a private placement?

It _could_ be that someone is buying their stock through third parties, not because it's a good investment but because SCO's lawsuit is helpful to them for other reasons (or just because they're spiteful). Are organizational investors required to reveal pass-through investments if they go through exchanges? Are they required to reveal this if they do a private placement?

I'm trying to figure out WHY anyone would do a private placement, and it's hard to figure out a "normal" reason to do so. Financial moguls, any comments/helps?

[ Reply to This | # ]

Novell will love that ...
Authored by: pajamian on Wednesday, November 30 2005 @ 07:17 PM EST
It means that there's more assets to be attached for Novels' counterclaim.

---
Windows is a bonfire, Linux is the sun. Linux only looks smaller if you lack
perspective.

[ Reply to This | # ]

Details on Syntax Partners, LLC
Authored by: stats_for_all on Wednesday, November 30 2005 @ 07:27 PM EST
The new equity PR credits Syntax Partners, LLC for "provid[ing] advisory assistance". A SyntaxPartners.com website lists principals as Joe Josephson and Michael Tunstall. Josephson has been associated with Bert Young, SCOX CFO in his checkered past, see for instance this post on Youngs past dealings

Syntax Partners is registered with the California Business Entity search

SYNTAX PARTNERS, LLC
Number: 200522410212
Date Filed: 8/10/2005
Status: active
Jurisdiction: DELAWARE
Address
1601 CLOVERFIELD BLVD., STE. 300 SOUTH
SANTA MONICA, CA 90404

A large Santa Monica CPA firm: Holthouse, Carlin and Van Tright shares the Syntax address. A poster on the Y!SCOX board helpfully informs us that "The receptionist connects you to Phil Holthouse's private secretary when you ask for Syntax."

Phil Holthouse has served on the Napster/Roxio board since 1/08/04. He recently purchased an additional 10,000 shares of NAPS stock. Baystar participated in a PIPE financing of NAPS in January, 2005.

.

[ Reply to This | # ]

SCO Raises $10 Million in Private Placement
Authored by: gribnick on Wednesday, November 30 2005 @ 07:40 PM EST
So do they get $10M or $8M (with BSF taking a 20% cut) ?? Is this taxable?

[ Reply to This | # ]

SCO ownership structure
Authored by: Kevin on Wednesday, November 30 2005 @ 07:41 PM EST

Hmm, before this transaction, there were roughly 18 million shares outstanding. Of these, the ownership structure was

Owner           
Shares (000)

Yarro               5,387

Other directors
and officers       
1,780

BayStar Capital     1,105

Krevlin               920

Capital Guardian   
1,033

Jet Capital           915

(Sorry about the table, I can't seem to make <pre> come out right. MathFox?)

There's nothing up on EDGAR yet about the new transaction, but after the transaction there would be almost 21 million shares outstanding, of which more than two-thirds would be held by the insiders. At what point do they decide to take the company private again, and have no further financial transparency nor accountability to bagholdersshareholders?

---
73 de ke9tv/2, Kevin (P.S. My surname is not McBride!)

[ Reply to This | # ]

My math says:
Authored by: darkonc on Wednesday, November 30 2005 @ 07:45 PM EST
2,813,333 shares to institutional investors for $9,846,665.50
and 39,116 shares to the board member to round out the last $153,334.72

If you multiply that first number by 3, you get a nice, round 8,440,000.00 shares. Does that number sound familiar to anybody?

---
Powerful, committed communication. Touching the jewel within each person and bringing it to life..

[ Reply to This | # ]

SCO Raises $10 Million in Private Placement
Authored by: Anonymous on Wednesday, November 30 2005 @ 07:48 PM EST
Sorry, but I can't believe they could find enough bone-headed people to buy $10
million worth of SCO stock -- no matter what the price is. There has to be some
backend deal going on here.

[ Reply to This | # ]

No bankrupcy
Authored by: Anonymous on Wednesday, November 30 2005 @ 07:53 PM EST
>You didn't really think they'd be allowed to go
>bankrupt, did you?

I suspect that we have something else in play.

Supposed company X financed the anti-Linux lawsuit.
After bankruptcy the creditors can ask the court to have a
trustee in charge of SCO. If such a trustee will find illegal
dealing between SCO and X then he has three, legal,
courses of action:

1) Sue X. If the Bankruptcy court will decide that such an
action makes business sense then it is its right, and duty,
to order the trustee to take such action.

2) Sell the information. The trustee can, with court
approval, sell copies of the relevant documents. IBM
may be willing to pay big $$$$ and try to get it back
later by suing X and/or SCO current management team.

3) Turn the relevant information to the SEC as
"evidenceof crime I run into."

If I were company X then I would pump into SCO as much
money as needed to keep it out of bankrupcy court. I
would also "ask" SCO to stay out of court forever, so
I'll never have to pay the true cost of a bankrupcy.

[ Reply to This | # ]

Owns Unix?
Authored by: Anonymous on Wednesday, November 30 2005 @ 07:55 PM EST
They are back to being more aggressive in their statements regarding ownership
of Unix:

"SCO owns the core UNIX operating system, originally developed by
AT&T/Bell Labs and is the exclusive licensor to Unix-based system software
providers."

[ Reply to This | # ]

How much to Boies?
Authored by: blang on Wednesday, November 30 2005 @ 08:11 PM EST
Is the deal with Boies still in effect?

Is this one of the qualifying events that would give Boies 20% or so?

In any case, from what I've heard this sounds like a Krevlin thing. And the
board member must of course be Yarro. I am happy to see that he is putting more
eggs in the SCO basket. It will make the inevitable crash so much more sweet.

[ Reply to This | # ]

  • Nothing for Boies - Authored by: Anonymous on Thursday, December 01 2005 @ 09:29 AM EST
My Theory - SCO Raises $10 Million in Private Placement
Authored by: Anonymous on Wednesday, November 30 2005 @ 08:11 PM EST
I have a theory.

Yarrow got a large chunk of stock when Canopy dropped SCO. AND Yarrow
isn't Yarrow associated with a non-profit that owns SCO stock?

When Canopy and SCO parted company, Yarrow left Canopy and got SCO.
Maybe this is an effort to keep the only remnants of that company afloat. With
the other posters commenting that maybe this is an effort to keep SCO from
going to bankruptcy court, this seems more and more likely.

I bet Yarrow would do anything to keep SCO as private as possible, and to
protect his power in the company, maybe even increase it somewhat.

So do you think the board member was Yarrow, and the company one of
Yarrow's?

Michael

[ Reply to This | # ]

Oh, good, good, good.
Authored by: Anonymous on Wednesday, November 30 2005 @ 08:44 PM EST

Doesn't this make some money available for the court to freeze for Novell, in their SCO-didn't-give-the-license-money-to-Novell complaint and freeze request.

BTW, what is the status of all that? I'm only an occasional reader here.

[ Reply to This | # ]

Frock Shopping...?
Authored by: Anonymous on Wednesday, November 30 2005 @ 08:51 PM EST
See what happens when I go out shopping?
...and how does the red dress look then PJ...?

[ Reply to This | # ]

SCO Raises $10 Million in Private Placement
Authored by: blacklight on Wednesday, November 30 2005 @ 09:01 PM EST
So SCOG gets a $10 mil private placement by moving its tin cup among its
existing investors. This is my assessment:

(1) If these investors are making their decision based on the same public
information that we have, then they would have been better off pouring their
money into my checking account - At least, I'd get rich.

(2) If these investors are making their decision based on information that we
the public don't have, then the sweet odor of insider trading is in the air.
However, I expect that SCO's inside info is about as good as the Bush
administration's classified, top secret and supersecret intelligence about
Saddam Hussein's WMDs. Sometimes, it just doesn't pay to be in the loop.

At any rate, SCOG is going to have to produce the evidence for its allegations
in December - Time flies, since 1 Dec starts tomorrow. I expect that litigation
activity will pick up as IBM will reintroduce many of its motions for summary
judgment and SCOG whines for more time. In that context, I expect the $10 mil to
evaporate very quickly.




---
Know your enemies well, because that's the only way you are going to defeat
them. And know your friends even better, just in case they become your enemies.

[ Reply to This | # ]

SCO Raises $10 Million in Private Placement
Authored by: Anonymous on Wednesday, November 30 2005 @ 09:17 PM EST
I just hope the added 10 million makes Suse 11 a even brighter spot on my
desktop.
LOLz
RT Smith

[ Reply to This | # ]

SCO Raises $10 Million in Private Placement
Authored by: blacklight on Wednesday, November 30 2005 @ 09:21 PM EST
The private placement may very well be an indication that desperation is in the
air: (1) Nobody, not even Microsoft is stepping forward to buy these SCOSource
"licenses"; (2) Nobody in the stock market is buying SCOG stock, so
SCO can't raise an capital there; (3) In the meantime, SCOG's cash reserves are
shrinking only a little bit faster than the cash reserves of the State of
Louisiana. However, unlike SCO, the State of Louisiana is a going concern.

In this context of an ever worsening financial situation, the private placement
seems to be a last ditch effort to raise capital and do the equivalent of a
colllagen injection to artificially keep the stock price shall we say
"inflated", at around $4. The existing investors were probably trading
off the certainty of financial doom in the near future against the 90%
probability of financial doom a few months farther down the road. At least this
time, the SCOG shareholders seem to be victimizing no one but themselves.

I expect the truth will eventually come out, as SCOG loses decisively in court,
and some of the current SCOG shareholders file suit against Darl the Snarl over
the statements he must have made to them to get the $10 mil. It won't be
pretty.



---
Know your enemies well, because that's the only way you are going to defeat
them. And know your friends even better, just in case they become your enemies.

[ Reply to This | # ]

SCO Raises $10 Million in Private Placement
Authored by: Anonymous on Wednesday, November 30 2005 @ 09:37 PM EST
More money to continue to pay the terrible legal defense.. fine by me.

[ Reply to This | # ]

Not a life line - but crew bailing out
Authored by: Anonymous on Wednesday, November 30 2005 @ 09:54 PM EST
While I didn't read every detail, I don't think there is much need for
speculation.

1. The existing member of the board is almost certainly Yarro.

2. The institutional stock holders are existing major institutional stock
holders.

We will probably found out all the whose, soon enough, thru SEC filings.

To the me:

- this doesn't look like somebody throwing a lifeline to the SS SCO

- it looks instead like the existing inside crew, trying to bail out [in the
boat sense, not the aircraft sense], SS SCO, using their own money...

I guess it's possible that they might feel their own personal stake (liability?)
would be too great, and/or under too much scrutiny if SCO were to sink in the
near future.


A groklaw regular, who prefers not to sign this particular speculation.



[ Reply to This | # ]

SCO Raises $10 Million in Private Placement
Authored by: Anonymous on Wednesday, November 30 2005 @ 10:22 PM EST
I work in Salt Lake. A co-worker's spouse participated in a mock jury trial
simulation for a law firm; by the description and the company names given, the
mock trial was for SCO vs. IBM. The way it was presented, the story was told of
"big, bad IBM" stealing from "little-guy SCO". The mock jury
went for it completely; SCO won big in the mock trial.

I have no reason to doubt the co-worker's story. Therefore, I think SCO has big
incentive to try as hard as they can to get to a jury trial. Or at any rate, the
mock trial results were probably what convinced the investors to put money in.

[ Reply to This | # ]

esker melchior weighs in
Authored by: Anonymous on Wednesday, November 30 2005 @ 10:25 PM EST
Yet another brilliant analysis from esker melchior

link

[ Reply to This | # ]

This explains...
Authored by: Anonymous on Wednesday, November 30 2005 @ 10:49 PM EST
The price movement over the last couple of weeks and especially volume, that's a
better indicator that something is happening in the background.

Tufty

[ Reply to This | # ]

Did I really think that they would be allowed to go bankrupt?
Authored by: AllParadox on Thursday, December 01 2005 @ 12:00 AM EST
Did I really think that they would be allowed to go bankrupt?

Well, yes, actually, and I believe I have said so.

That is one of the nice things about Groklaw and LawGrokkers: one may be wrong
without being called a lying idiot.

---
PJ deletes insult posts, not differences of opinion.

AllParadox; retired lawyer and chief Groklaw iconoclast. No legal opinions,
just my opinion.

[ Reply to This | # ]

Isn't this considered libel?
Authored by: Anonymous on Thursday, December 01 2005 @ 01:33 AM EST
IANAL - but when they say-

SCO owns the core UNIX operating system, originally developed by AT&T/Bell
Labs and is the exclusive licensor to Unix-based system software providers.

isn't that libel?
It is so obviously untrue...

[ Reply to This | # ]

Darcy Mott appears to be the buyer
Authored by: Anonymous on Thursday, December 01 2005 @ 04:42 PM EST
<http://www.sec.gov/Archives/edgar/data/1102542/000110254205000015/xslF345X02
/primary_doc.xml>

[ Reply to This | # ]

SCOX Cash Flow Revised -- No Bankrupcy, Maybe never
Authored by: spuluka on Friday, December 02 2005 @ 06:24 AM EST
Back in the spring I posted a cash flow estimate saying that Scox would be
bankrupt by December. Naturally, this new investment prevents that but there
were other delays in cash depletion too.

http://www.linuxpipeline.com/showArticle.jhtml?articleID=160501629

Below I have revised the table presented with the new cash numbers from the
summer 10Q. They actually had cut costs and earned money from investment sales
that had already delayed bankruptcy by at least four months. This current
transaction pushed it off to the end of next summer at earliest.

The really interesting news is that first quarter next year they MAY be break
even or slightly at profit on the core business. All the income statements are
now dancing on the edge of profit if you remove SCO Source. And the big SCO
source expenses are gone in Q1 next year.

I have not done a full detail, but the lion's share of the cutting is in sales
& marketing with number two being R&D. General Admin and overhead show
a small decline versus year ago. So you can see this is not a long-term
profitable strategy. You are slicing out sales and product development and
keeping virtually all the overhead otherwise. The down spiral of features and
customers is inevitable.

Transaction Amount Org Est New SEC Cash
Cash Burn 6/1/05 2414.75 6,020 12,602
Boise Quarter 9/1/05 2000 4,020 10,602
Cash Burn 9/1/05 2414.75 1,605 8,187
New Stock Investment 11/27/05 10,000 18,187
Boise Quarter 12/1/05 2000 -395 16,187
Cash Burn 12/1/05 2414.75 -2,810 13,773
Cash Burn 3/1/06 2414.75 -5,225 11,358
Cash Burn 6/1/06 2414.75 -7,640 8,943
Cash Burn 9/1/06 2414.75 -10,054 6,528
Cash Burn 12/1/06 2414.75 -12,469 4,114
Cash Burn 3/1/07 2414.75 -14,884 1,699
Cash Burn 6/1/07 2414.75 -17,299 -716
Cash Burn 9/1/07 2414.75 -19,713 -3,131


---
Steve Puluka
Pittsburgh, PA

[ Reply to This | # ]

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