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The Almighty Buck Businesses Caldera

SCO and Baystar Strike a Deal 336

Posted by michael from the know-when-to-fold-em dept.
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.
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SCO and Baystar Strike a Deal More

SCO and Baystar Strike a Deal

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  • Ha ha! (Score:5, Insightful)

    by BWJones ( 18351 ) * on Tuesday June 01, 2004 @06:48PM (#9309617) Homepage Journal
    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.

    • Re:Ha ha! (Score:5, Funny)

      by Skyshadow ( 508 ) * on Tuesday June 01, 2004 @06:50PM (#9309644) Homepage
      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.

      Hey, if it worked for Bill Gates...

      (yeah, I know it's a cheap shot, but it's all I can afford at the moment)

      • Bill Gates did not prostitute himself out. He merely bought almost every software product in his empire and bundled it together half assed.

        The great American dream. Money for nothing, and your chicks from your R&D department...

      • Re:Ha ha! (Score:5, Insightful)

        by ThisIsFred ( 705426 ) on Tuesday June 01, 2004 @10:12PM (#9311064) Journal
        Yeah, Microsoft. Hmm. Stallman's ideas were equally brilliant and changed the computing landscape in a profound way (you can argue good or bad, just like with Microsoft). But Stallman doesn't live in a 68 billion dollar robo-house, so his ideas aren't interesting to the general public.

    • Re:Ha ha! (Score:3, Insightful)

      by Anonymous Coward
      Hopefully it'll be a lesson to the VC's limited partners too, to watch out for sleezy VC firms. The VC's probably still get handsome fees for managing the fund. It's the investors in BayStar who lost their shirt on this one.

    • Re:Ha ha! (Score:5, Funny)

      by moberry ( 756963 ) on Tuesday June 01, 2004 @06:54PM (#9309685)
      What you should have done is hired Marta Stweart's old accountant, so before any of this went down you could have sold your stock.

      • You think it's funny, but actually ... (Score:5, Informative)

        by mec ( 14700 ) <mec@shout.net> on Tuesday June 01, 2004 @07:07PM (#9309808) Journal
        When an investor such as Baystar does one of these convertible preferred deals, they can do something called "shorting against the convert".

        Here's how it works. At the time Baystar bought their convertible preferred shares, SCOX was trading at about $15 (roughly ... 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.

        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 ... if you've got a convertible ... you just pull out the convertible preferred shares and convert them, in order to have shares.

        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.

        • SubGenius fodder for sure (Score:5, Insightful)

          by Weaselmancer ( 533834 ) on Tuesday June 01, 2004 @07:28PM (#9309989)

          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

          • Re:SubGenius fodder for sure (Score:5, Insightful)

            by Anonymous Coward on Tuesday June 01, 2004 @07:36PM (#9310050)
            Shorting is a big risk. When you buy a stock your potential losses are limited to your initial investment. When you short a stock your potential losses are unlimited. This is why I did not short SCOX, I was afraid someone like MS would buy them out, and then I'de be screwed. There is no such thing as a sure thing.
          • I don't do shorts, and I couldn't find any way to buy a put option against SCOX. I still think they're downward-bound, is there any way to make money on it with reasonably limited risk?

          • Re:SubGenius fodder for sure (Score:5, Informative)

            by fname ( 199759 ) on Tuesday June 01, 2004 @07:50PM (#9310145) Journal
            Well, when this was first announced, SCOX was trading at about $1. So when would you have shorted? $2, $5, $10? If you shorted $10,000 at $5/share, by the time it hit $20, you'd have to deposit an additional $30,000 to cover the difference in what you owe, otherwise you would need to sell.

            So ya, if you shorted at $20 you would have made a killing (almost double your investment). If you shorted at $5, you would probably have been forced to cover, losing double, triple or quarduple your initial investment. So it never would have been that easy.
            • I wonder if Baystar is now in position to pull a short squeeze.

              I.e. they lend others theirs shares to short and buy them up simultaneously.

              Then when the time is up to return the shares Baystar is the only game in town and they sell their shares (which they have 2x or more of) at a profit. The actual shares they are left with are then irrelevant.

          • Re:SubGenius fodder for sure (Score:4, Interesting)

            by Phillup ( 317168 ) on Tuesday June 01, 2004 @08:01PM (#9310224)
            I bought at 5 and sold at 10... never dreamed it would go to 20, I mean seriously... who thought there were that many silly people in the market.

            I felt sure that there were enough silly people to push it to 10 tho.

            Didn't have the balls to play on the short side, because I can't tell who all is in that bed... so, I couldn't really tell how long the ride was gonna last.

            And, I'm still not rich. But... it didn't hurt.
            • Didn't have the balls to play on the short side, because I can't tell who all is in that bed...

              That's why I'm not shorting MS stock. They may lose the server market and some desktop market to Linux, but this being in bed with Hollywood with the DRM thing may make them the next living room cable TV subscription box. There are enough people that don't want in bed with MS, it could go either way.
          • Well some of use actually want to live in our house for a little bit before we lose it to the bank. "Sorry sweety, you can't have new shoes because daddy lost big short selling stock" really doesn't cut it.
          • You know the joke about the whole SubGenius thing..."If you're so smart, why aren't you rich?"

            Because intellignece is not the key attibute required for wealth -- I believe the dominant attribute is a lack of morals.

            I'll betcha not a single person on all of Slashdot cashed in on these fools. Damn.

            Not true: I made a modest profit from shorting SCO stock.

          • Re:SubGenius fodder for sure (Score:4, Insightful)

            by wayne606 ( 211893 ) on Tuesday June 01, 2004 @08:41PM (#9310520)
            The problem is that most of us think "the company sucks and is worthless, so I will short it". But you're really betting that the average investor, who may be a lot more vulnerable to SCO's evil PR, is going to agree with you in the immediate future. That's a very different thing...

          • Shorting SCOX (Score:3, Interesting)

            by sjbe ( 173966 )
            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.

            This is a bit of bragging I guess but I shorted a few hundred shares from just under $14 down to just under $6. (you can find old posts of mine where I suggest shorting SCOX here on slashdot) Didn't make a fortune because I didn't have enough cash to short a huge amo

          • Re:SubGenius fodder for sure (Score:5, Informative)

            by WhiteWolf666 ( 145211 ) <sherwinNO@SPAMamiran.us> on Tuesday June 01, 2004 @08:49PM (#9310571) Homepage Journal
            I did....

            Well, I tried, anyways.

            I spent nearly 4-5 days, every twenty minutes or so, trying to short SCOX. At $20, $22, even $18.

            Go look at my post history, I talk about it at the time SCOX was up there.

            I would have shorted 5,000, even 10,000 shares.

            I don't know exactly why, but there wasn't enough of a 'float' on SCOX for the mainstream brokerages to allow individuals to 'short' it.

            I was pissed off. I've spent the last few months bitching about it to my co-workers.

            In 'short' (no-pun intended), you didn't miss out on anything. It simply wasn't possible to begin with.

            I tried, and got nothing. Oh well *sigh*

        • Re:You think it's funny, but actually ... (Score:5, Informative)

          by TheWizardOfCheese ( 256968 ) on Tuesday June 01, 2004 @07:32PM (#9310022)
          The parent is an excellent post, and deserves to be rated +5, informative. However, I would like to point out a technical error to those Slashdot readers who understand finance:

          A convertible is really just a bond + a call option, and shorting against a call option is a common strategy.

          No. Many, many tears have been shed over this fallacy. Most converts are like a bond + call, so long as the credit of the name remains good. The credit will be reflected in the underlying stock price, and in this region, the bond value acts as a floor, producing an option-like value profile with positive gamma. That means that since you are long the option, your delta hedge will be profitable even if you can't rebalance. However, when the name is close to default, the bond value itself will go to zero; this produces a region of negative gamma. A convert thus has both positive and negative gamma, quite unlike a vanilla option; it's definitely possible to lose your shirt even if you're delta hedged.
        • When an investor such as Baystar does one of these convertible preferred deals, they can do something called "shorting against the convert".

          I've seen lots of postings suggesting that Baystar may have hdged their own deal, but the question is: "where's the profit?".

          OK, so Baystar can hedge against losses by shorting, but they also hedge against any profits.

          So it's possible that Baystar did short and limited their losses, but by shorting, they would also limit their possible profits.

          Take your case abo

        • Re:You think it's funny, but actually ... (Score:4, Interesting)

          by Bruce Perens ( 3872 ) <bruce@perens.com> on Tuesday June 01, 2004 @08:42PM (#9310532) Homepage Journal
          This only works if there are short positions available. Which have been hard to find in SCOX. Are you shre they could do this?

          Bruce

    • Re:Ha ha! (Score:5, Insightful)

      by GPLDAN ( 732269 ) on Tuesday June 01, 2004 @06:55PM (#9309689)
      I agree that SHOULD be the lesson. Yet, Baystar reps constantly repeated the mantra that the litigation was not being focused on properly.

      I'm afraid that that the Baystars of the word learn, is to properly evaluate the IP case before funding it. In fact, a whole cottage industry is there for the plucking. Law firms that SPECIALIZE in consulting with investment firms, to determine if the IP case has merit. "Looking to invest in that no name company that has a submarine patent? Hey, talk to us first! We'll let you know if they have any chance of winning! Our lawyers only run $200/hr!"

    • ...they've now converted their investment to $13 million in cash and $13.7 million of common stock ...

      So when do they plan on dumping the common stock too? Waiting for the shares to plunge below $4 maybe? (Still waiting for the firesale so I can get my cat a $2000 office chair to sleep on).

    • Re:Ha ha! (Score:4, Interesting)

      by frisket ( 149522 ) <peter@silm a r i l.ie> on Tuesday June 01, 2004 @07:25PM (#9309960) Homepage
      This should be a lesson to VC funds and financing operations...

      Why should they care? VCs expect to lose about 85% of everything they invest -- that's the level of risk they take. They make so much back on the other 15% that it's worth it to them.

      This is why they're not really bothered about due diligence, and why they aren't interested in ways of reducing that 85% -- it's chickenfeed compared to the profits on the other 15%.

      Yes, that's "Banker" spelled with a "W"...

      • Re:Ha ha! (Score:5, Informative)

        by Fnkmaster ( 89084 ) on Tuesday June 01, 2004 @10:05PM (#9311021)
        This is slightly different - this is a private equity fund, they do later stage investments than a venture capital firm. In particular, Baystar Capital specializes in PIPE investments, according to their own web page - Private Investments in Public Equities. These are private placements of capital to companies that are already publically traded in the market, so much later stage than true VC, more likely to be public companies that have stumbled on a cash-strapped period of time, but with well-established businesses and track records behind them.


        Generally, you aren't making the same kind of bet that 85% of everything you put money into will flop in private equity, and you don't get the kinds of massive multipliers on success that you get with early stage VC (where a 10 million dollar investment might turn into 200-500 million dollars worth of equity after IPO or a big acquisition deal for the real "blockbuster" companies).


        I'd guess that a 2x-4x multiple on their successful investments would be considered quite good (remember, these are mostly already publically traded companies). So actually taking a 50% hit on an investment would not be great for these guys, but it's still par for the course. Some people here are speculating they were partially hedged, though I'm not sure it would be possible to effectively hedge such a massive position in a stock that was difficult to short in the open market, though I guess they could have written their own options.


        According to their own site, they've invested $745 million as a fund, which means 50 million was about 8% of their entire fund. So losing half of it, while not devastating, is definitely not a trivial amount even for a fund like this.

    • Re:Ha ha! (Score:4, Insightful)

      by rice_burners_suck ( 243660 ) on Tuesday June 01, 2004 @07:30PM (#9310005)
      Your comment basically sums up my thoughts on this issue. I am disgusted whenever I read of a company that tries to make money through sleazy litigation.

      I can understand that, from time to time, there are legitimate issues in which companies need to involve the court system. But all too often, it seems like companies are being created based on the premise that corporations have a God-given right to eternal perpetually increasing profits, and that the government has a duty to protect those profits. And it is quite the opposite. Nothing says that any business deserves to exist, let alone make any profit. The only reason that a business should exist is because it is doing something constructive, from which all involved parties will benefit, and perhaps even because it's doing it a little better than the competition. I call this an innovative company. It is a company that didn't begin from the conscious decision to screw anybody over. It began because there was a problem to solve, and it solved it.

      The trouble with sleazebags like SCO is that they do not add anything constructive to the world. They exist because they made a conscious decision to profit by screwing people over. That is not an innovative company.

      I'd like to emphasize that I think there is nothing wrong with companies making profits. On the contrary, I am pleased when I see companies succeeding, because ultimately, that means the people working for those companies are making successful choices.

      But when some garbage company like SCO comes along and decides its sole purpose is to destroy an industry and profit from that destruction, the same way we obtain energy from matter by smashing it up in a nuclear reactor, that makes me mad, because I see how much of the work, blood, sweat, and tears of an entire community is going into the garbage, and how much energy, money, and effort must be wasted in defending against that garbage that could instead be used to advance the world and make it a better place.

      SCO is a garbage company. I hope this mess teaches all other investors not to touch that mass of stinking garbage with a nine foot pole. Because it's not worth it.

      SCO. We're garbage.

  • Does this mean that SCO is broke?
    • Not yet but it is very clear how SCO's investors got screwed very nice.

    • Apparently not. (Score:5, Interesting)

      by ron_ivi ( 607351 ) <sdotno@cheapcomp ... m ['ces' in gap]> on Tuesday June 01, 2004 @06:57PM (#9309715)
      Aparanetly not... According to Baystar, they're happy with SCO's cash management, and mangement of the litigation.

      Quoth the article:

      "...BayStar is extremely satisfied with SCO's current operating and cash management plans, new initiatives, management of the litigation, and plans for improving its business going forward," said Larry Goldfarb, managing general partner, BayStar Capital.

      Now if they're so happy, why are they buying their shares back?

    • Re:So... (Score:5, Insightful)

      by k98sven ( 324383 ) on Tuesday June 01, 2004 @07:14PM (#9309871) Journal
      No. It was a $50 million dollar cash investment for new SCO stock.
      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.

  • Hmmm (Score:5, Funny)

    by Anonymous Coward on Tuesday June 01, 2004 @06:49PM (#9309634)
    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

    • Re:Hmmm (Score:5, Funny)

      by cipher uk ( 783998 ) on Tuesday June 01, 2004 @07:02PM (#9309767)
      yeah you missed the <br>'s

  • some is better than none (Score:5, Insightful)

    by lawngnome ( 573912 ) on Tuesday June 01, 2004 @06:49PM (#9309636)
    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...

  • This is great (Score:3, Insightful)

    by JTMON ( 313481 ) on Tuesday June 01, 2004 @06:49PM (#9309638) Homepage
    One of the finest examples of real world karma in action..:)

  • loss ? (Score:2, Interesting)

    by s0m3body ( 659892 )
    26M$ is still much better then what it would be in four to eight weeks time

  • Stock to TP conversion (Score:5, Funny)

    by raistphrk ( 203742 ) on Tuesday June 01, 2004 @06:50PM (#9309645)
    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.

  • A hole below the waterline (Score:4, Insightful)

    by Anonymous Coward on Tuesday June 01, 2004 @06:50PM (#9309646)
    Even the rats that funded this FUD operation see the handwriting on the wall. Half their cash is better than none....

    • Re:A hole below the waterline (Score:4, Informative)

      by oolon ( 43347 ) on Tuesday June 01, 2004 @07:15PM (#9309877)
      Half? They got 13 Million of the 50 Million in cash, and 13 Million Shares. Your are assumming they will be able to dump 13 million in stock and get 13 million for it, I expect if they sell that stake they will get far less. At current levels, thats about 2.7 million shares, the daily volume for SCOX is just 260,000. No way they are going to be able to clear that stake. On the plus side if they dumped 2.7 million shares of scox on the market it would go into a nosedive it probably could not pull out of. I think the bank assumed they could get about third of the money back so took the deal, as they really could not see the stock going anywhere else other than down.

      James

  • Look at the bright side (Score:4, Insightful)

    by bstadil ( 7110 ) on Tuesday June 01, 2004 @06:51PM (#9309652) Homepage
    Look at the bright side. Baystar and RBC got shafted as they so richly deserve and there is potential more money to be had by IBM when SCO is ordered to pay legal fees.

    Obviously this requires they case is decided before they are totally broke. A big if, but looking better every day.

    Thirdly we will have a clear wipeout of SCO. If they went bust before the fat lady sings this could still leave some doubt (FUD residue) about the GPL etc.

  • Wow (Score:5, Interesting)

    by neilcSD ( 743335 ) on Tuesday June 01, 2004 @06:52PM (#9309655)
    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.

  • Actually a little less than half... (Score:5, Interesting)

    by Sebby ( 238625 ) on Tuesday June 01, 2004 @06:52PM (#9309661)
    Since I've taken my money from RBC to another bank, mostly due to their involvment w/SCO.

    Their (even bigger) loss.

  • Profit (Score:3, Insightful)

    by _Sprocket_ ( 42527 ) on Tuesday June 01, 2004 @06:52PM (#9309665)
    I suppose we won't be seeing any Baystar 3 step plans to profit jokes with this story.

  • Look on the bright side (Score:5, Funny)

    by L. VeGas ( 580015 ) on Tuesday June 01, 2004 @06:54PM (#9309681) Homepage Journal
    SCO let them run Linux without having to pay that licensing fee.

  • Somehow (Score:5, Insightful)

    by FS1 ( 636716 ) on Tuesday June 01, 2004 @06:54PM (#9309683)
    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.

  • Bow to Your Master's Card (Score:5, Funny)

    by Anonymous Coward on Tuesday June 01, 2004 @06:54PM (#9309687)
    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.

  • How to make a small fortune investing in SCO stock (Score:5, Funny)

    by Anonymous Coward on Tuesday June 01, 2004 @06:55PM (#9309695)
    First, start with a large fortune . . . . . .

  • Dump it! (Score:3, Insightful)

    by gcaseye6677 ( 694805 ) on Tuesday June 01, 2004 @06:56PM (#9309705)
    Baystar had better dump that common stock right away. The price fell more than 7% today alone, and I can't imagine how bad its going to tank on the 10th, when SCO has to announce its earnings (the call got pushed back from tomorrow so they can have time to properly prepare their FUD). This will have to put a serious dent in their legal budget, and combined with the inevitable fall in stock price and decreasing revenues, I think the end for them might be very close.

  • Just goes to show... (Score:5, Interesting)

    by MooseByte ( 751829 ) on Tuesday June 01, 2004 @06:57PM (#9309718)

    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...

  • So SCO made money? (Score:3, Interesting)

    by Luddite Slayer ( 607824 ) on Tuesday June 01, 2004 @06:58PM (#9309723) Homepage Journal
    Would this be seen as profit for SCO? I'd hate to see them have more funding for the FUD campaign from hell.

    • Re:So SCO made money? (Score:5, Interesting)

      by overbyj ( 696078 ) on Tuesday June 01, 2004 @07:05PM (#9309788)
      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.

  • This just in... (Score:4, Interesting)

    by GPLDAN ( 732269 ) on Tuesday June 01, 2004 @06:59PM (#9309730)
    Baystar investment managers have left Baystar "to pursue other opportunities." These include, running technology funds for Mutual Fund companies!

    Gotta love the way the ol boy network functions in the financial sector. Just give your classmate from Yale a call, and boom - you are off to lose more money for other people...

    Financial analysts need permanent records. I need to be able to Google the guy running a fund, and have it say "this moron thought SCO was a good idea in 2003."

  • SCO stock is like ... (Score:5, Funny)

    by Anonymous Coward on Tuesday June 01, 2004 @06:59PM (#9309733)

    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 .. err .. our stock shines out like a shaft of gold when all around is dark.

  • Good deal for Baystar. (Score:4, Interesting)

    by Jaywalk ( 94910 ) on Tuesday June 01, 2004 @07:02PM (#9309760) Homepage
    So they get more than a quarter of their original investment back in cash and still have common stock they can sell off if SCO (*cough*) recovers. Under the circumstances, I'm kind of surprised SCO came up with such generous terms. If they had stuck to the contract they wouldn't have had to come up with nearly that amount. I'd be willing to bet that SCO said some things in negotiating the deal that they shouldn't have and that Baystar effectively blackmailed them by saying they'd let all those indiscretions come out in court.

    Any takers?

  • This reminds me alot of Junk Bond trading from what I remember of reading in the newspapers (remember those things...newspapers that is...well, soon SCO too) at the time.

    With what the remainder of the stock [yahoo.com] is selling for now and considering outside held debt, this would not be a good time to invest in SCO

  • I'm Now Taking Bets... (Score:5, Interesting)

    by the_mad_poster ( 640772 ) <shattoc@adelphia.com> on Tuesday June 01, 2004 @07:07PM (#9309809) Homepage Journal

    ... 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.

  • Let me summarize... (Score:5, Informative)

    by Fnkmaster ( 89084 ) on Tuesday June 01, 2004 @07:08PM (#9309818)
    They realized the 50 million was a big fuck up. The general VC/Private Equity reaction to a big fuck up is to get back what you can, save face for yourself, and try not to destroy/discredit the company publicly if at all possible (it makes it harder for them to get companies to do deals with them in the future).


    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.

  • SCO's Scam (Score:5, Funny)

    by Blackeagle_Falcon ( 784253 ) on Tuesday June 01, 2004 @07:13PM (#9309860)
    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.

  • If they go under $.20 a share (Score:5, Funny)

    by Greyfox ( 87712 ) on Tuesday June 01, 2004 @07:29PM (#9310002) Homepage Journal
    Can we stage a hostile takeover and fire Darl? I'd kick in $20...

  • Poor, hoodwinked BayStar.... (Score:5, Interesting)

    by Vancouverite ( 227795 ) <brendt@hess.motosport@com> on Tuesday June 01, 2004 @07:29PM (#9310003)
    Not only did they lose big bucks up front ($13 Mil back from an initial $20 mil + whatever they paid RBC for their shares), but they will be dumping this stuff for months!

    From the PR:

    The agreement includes a restriction on sales and dispositions by BayStar of the Company's common stock. BayStar may not exceed on any trading day, 10% of SCO's average daily trading volume on Nasdaq during the five trading days preceding such trading day. The agreement includes a mutual general release by the parties and has not required compensation to any outside agents.
    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!

  • Burn rate bites large chunk... (Score:5, Interesting)

    by WCMI92 ( 592436 ) on Tuesday June 01, 2004 @07:37PM (#9310064) Homepage
    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...

  • Interesting Darl Interview... (Score:5, Interesting)

    by mikael ( 484 ) on Tuesday June 01, 2004 @07:49PM (#9310138)
    There's an interesting interview with Darl at The SCO 2004 forum [thescogroup.com]

    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: [ox.ac.uk]

  • For more (Score:3, Informative)

    by sjvn ( 11568 ) <(moc.1anv) (ta) (nvjs)> on Tuesday June 01, 2004 @07:50PM (#9310146) Homepage
    See:

    http://www.eweek.com/article2/0,1759,1605475,00. as p

    Steven

  • My Belly (Score:3, Funny)

    by LouSir ( 681838 ) on Tuesday June 01, 2004 @07:56PM (#9310190)
    I would like to invest my beer gut into SCO. Then in 6 months I have only 1/2 a beer gut. Sounds good to me. Lou Sir

  • Doing the numbers (Score:3, Interesting)

    by Anonymous Coward on Tuesday June 01, 2004 @07:58PM (#9310204)
    Lets work out the numbers. At Microsoft's suggestion, Baystar invested $50 million cash in SCO. They getting back $13 million in cash and $13.7 million in stocks that will soon be almost worthless.

    That means that Microsoft now owes Baystar something in excess of $50 million - $13 million = $37 million and $50 million - $26.7 million = $23.3 million.

    The former is more realistic, and Baystar execs deserve something for their willingness to play the fool. So, in the next year or two look for Microsoft to do something that'll net Baystar a quick and easy $50 million in profit.

    Am I being cynical or conspiratorial? I think not. Just realistic.

    Mike Perry, Inkling blog [inklingbooks.com], Seattle

  • Bed Information (Score:3, Interesting)

    by possum99 ( 573820 ) on Tuesday June 01, 2004 @08:11PM (#9310299)
    Baystar only put in $20Mil originally. RBC put in the other $30 Mil. I'm figuring they probably paid RBC 7-8Million for the their 20,000 shares. So you figure they have about $28 Million. They get 13 cash and 2.1 Million shares(currently at $4.80) for another 8 Million. If they were smart(they are) they have been shorting SCO for some time(probably shortly after the deal was done) around the $15-20 stage. They will at the very least break even, but Im thinking they will actually make a very modest profit in the area of 3-5 Million. All that aside, I am sure even if they were to take a small loss, they are very happy not to have lost their shirts. They were sweating, the more they read on the case, the worse things looked. They talked about SCO dropping UNIX entirely and focusing on the IP. I think someone must have lifted the sheet and revealed the fine turd they had bought;-)

  • Does this mean the real Darl is back? (Score:3, Funny)

    by bstone ( 145356 ) on Tuesday June 01, 2004 @08:16PM (#9310335)
    Is Darl going to be able to start shooting off his mouth again? Will we get a new laugh every few days as he makes outrageous claims, sues more people, contradicts himself publicly, etc.

    I just can't wait. Perhaps they'll sue the penguin lovers society first, followed by 'all programmers', then on to some bizarre victims of their wrath.

  • Interesting timing on the rescheduled earnings... (Score:4, Interesting)

    by rewt66 ( 738525 ) on Tuesday June 01, 2004 @08:37PM (#9310491)
    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?

  • These shrewd investors (Score:3, Interesting)

    by mabu ( 178417 ) on Tuesday June 01, 2004 @11:29PM (#9311471)
    should wait until SCO wins their case. Then their stock will undoubtedly go up and they'll be rolling in dough... right?

    Reminds me of the bully in school who picks on you every day and challenges you to a fight, and then when you finally agree to meet him after school, he's not there.

    SCO's investors should hang by them until all their bones are ashes. Take a cue from the Bush administration and never say you've made a mistake. Stay the course... thousand points of light.. etc... We're all taking notes you stupid moron investement bankers.

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