SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast
Tuesday, June 01 2004 @ 06:32 PM EDT
BayStar and SCO have come to a meeting of the minds. SCO will repurchase and retire all 40,000 shares of Series A-1 Convertible Preferred Stock currently held by BayStar. I'm no financier, so don't go by me, but it looks like BayStar got the short end of the stick. For shares with a face value of $40,000,000, they are being paid $13 million and two million common shares. Of course, this is SCO's press release telling the tale, so who knows? Here is the press release. What stands out to me is that BayStar, while stating their current satisfaction with SCO for the record, have been restricted in how fast they can dump their SCO stock:
"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 second quarter financial results conference call won't be tomorrow. It has been postponed until next Thursday.
Here is Dion Cornett's view on what it all means, in today's "Open Source Wall Street":
"SCOX smartly negotiates its way out of the Series A-1 preferred
"The SCO Group (SCOX: Underperform) announced today that it has redeemed $40M (face-value) in preferred A-1 stock for $13M in cash and roughly 2 million shares. We believe that this is a very good deal for SCOX shareholders as the company relieves itself of a major disgruntled investor and eliminates over $40M in preferences ahead of common. We expect shares to respond positively to the news and do not anticipate negative pressure from BayStar selling. While we do not know how quickly BayStar may attempt to liquidate its newly held common shares, we believe that the investment company may be inclined to hold – awaiting a potential legal victory – based on recent public comments by BayStar's management.
"SCOX delays, preview of SCOX results, upcoming SCOX catalysts
"SCOX has delayed reporting its Apr-qtr results, originally to be announced tomorrow, now scheduled for next Thursday. We expect SCOX to report revenue of $11.6 million, a 46% year-over-year revenue decline and an EPS loss of $.31. Investors should also receive further details with respect to the company's end-user Linux licensing efforts including dollars received from the controversial EV1.net deal. In aggregate, we believe that there is more potential downside than upside to our estimates, including the $250,000 we have attributed to EV1. Despite the anticipated soft results, we do not expect a meaningful move in the stock. We believe that investors are increasingly focused on court activity versus operations and that movement in the stock may be tied to legal events, the nearest being a June 9th hearing to review DaimlerChrysler's Motion for Summary Disposition and on June 14 SCOX's required response to IBM's Partial Motion to Dismiss. Legal feedback suggests it may be too early for a court to grant dismissal. However, the potential negative catalyst versus the status quo causes us to maintain our Underperform rating, despite our belief that the A-1 conversion/redemption values the stock fairly short-term."
The story didn't make a headline on his page 1. He still rates SCO Underperform. More details on eWeek. Here is SCO's press release.
Source: The SCO Group, Inc.
The SCO Group to Retire All Shares of Series A-1 Convertible Preferred Stock
Tuesday June 1, 3:46 pm ET
LINDON, Utah, June 1 /PRNewswire-FirstCall/ -- The SCO Group, Inc. ("SCO") (Nasdaq: SCOX - News) 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. The shares of Series A-1, which have a face value of $40 million, will be retired through a payment of $13 million in cash and the issuance of 2,105,263 shares of the Company's common stock, payable and issuable upon closing which will occur upon the effectiveness of a shelf registration statement for the resale of the common stock by BayStar.
Upon repurchase, all shares of Series A-1 preferred stock will be cancelled and retired and the rights and preferences of the Series A-1 shares will be terminated including the right to $40 million of liquidation preference, preferred dividend rights that would accrue at a rate of 8% and escalate by 2% annually up to 12%, restrictive covenants and all other contractual rights granted to the holders of Series A-1 shares. Following the repurchase, the Company will have only common stock outstanding.
Upon closing, the effective result of the Company's Series A-1 financing activities (giving effect to the repurchase, together with the prior conversion of 10,000 shares of Series A-1 for 740,741 shares of common stock), will be the Company having received $37 million in proceeds, before expenses, and having issued 2,846,004 shares of common stock at an effective price of approximately $13.00 per share.
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.
"After productive and substantial discussions with SCO's management team, board of directors and legal team, 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. "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."
This press release contains forward looking statements related to SCO's relationship with BayStar Capital and BayStar's plans to sell shares of its Series A-1 Convertible Preferred Stock. SCO wishes to advise readers that a number of important factors could cause actual results to differ materially from those anticipated in such forward-looking statements. These factors that could cause actual results to differ materially from those anticipated include the risk that the transaction described in this press release may not close, the company's cash may not be sufficient for its needs and the Company may not realize the expected benefits of the transaction. Other factors affecting the company's business are discussed in more detail in SCO's filings with the Securities and Exchange Commission.
About SCO
The SCO Group (Nasdaq: SCOX - News) helps millions of customers in more than 82 countries to grow their businesses with UNIX business solutions. Headquartered in Lindon, Utah, SCO has a worldwide network of more than 11,000 resellers and 4,000 developers. SCO Global Services provides reliable localized support and services to all partners and customers. For more information on SCO products and services visit http://www.sco.com.
SCO and the associated SCO logo are trademarks or registered trademarks of The SCO Group, Inc. in the U.S. and other countries. UNIX is a registered trademark of The Open Group in the United States and other countries. All other brand or product names are or may be trademarks of their respective owners.
Source: The SCO Group, Inc
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast | 171 comments | Create New Account
Authored by: Anonymous on Tuesday, June 01 2004 @ 06:52 PM EDT
Sounds like Baystar not only lost their shirts but are eating their shorts as
well. I wonder how they like the skid mark fudge-nuget center?
Baystar gets lift from Midway, MSFT - Authored by: Anonymous on Tuesday, June 01 2004 @ 07:27 PM EDT
Baystar gets lift from Midway, MSFT - Authored by: seanlynch on Wednesday, June 02 2004 @ 10:11 AM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: BigTex on Tuesday, June 01 2004 @ 08:30 PM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: rgmoore on Tuesday, June 01 2004 @ 09:24 PM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: DeepBlue on Wednesday, June 02 2004 @ 03:42 AM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: Anonymous on Wednesday, June 02 2004 @ 10:32 AM EDT
Pipe dreams - Authored by: wvhillbilly on Wednesday, June 02 2004 @ 09:36 AM EDT
Look at the bright side
Authored by: bstadil on Tuesday, June 01 2004 @ 06:54 PM EDT
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.
Look at the bright side - Authored by: ADRA on Tuesday, June 01 2004 @ 06:55 PM EDT
Look at the bright side - Authored by: Anonymous on Tuesday, June 01 2004 @ 06:59 PM EDT
Guilty as charged - Authored by: bstadil on Tuesday, June 01 2004 @ 07:02 PM EDT
Look at the bright side - Authored by: arch_dude on Tuesday, June 01 2004 @ 08:25 PM EDT
(Always) Look at the bright side (of life) - Authored by: Anonymous on Tuesday, June 01 2004 @ 11:08 PM EDT
Look at the bright side - Authored by: Anonymous on Wednesday, June 02 2004 @ 12:57 PM EDT
bankruptcy won't save them! - Authored by: xtifr on Wednesday, June 02 2004 @ 02:42 PM EDT
Hemorrhaging money
Authored by: Fanglord on Tuesday, June 01 2004 @ 06:58 PM EDT
How much longer can SCO keep this up? Is there some way to find out how
much they have left?
Even if they are running low, they'll probably be rescued by a fairy-
godmother investor...
Hemorrhaging money - Authored by: Anonymous on Tuesday, June 01 2004 @ 07:09 PM EDT
Re: Hemorrhaging money - Authored by: Maple Syrup on Tuesday, June 01 2004 @ 10:45 PM EDT
Doesn't work - Authored by: Anonymous on Tuesday, June 01 2004 @ 11:52 PM EDT
Doesn't work - Authored by: Maple Syrup on Wednesday, June 02 2004 @ 11:49 AM EDT
a WORKING link to sco's quarterly financial statements. - Authored by: Anonymous on Tuesday, June 01 2004 @ 07:20 PM EDT
Yeah, well, maybe - Authored by: Anonymous on Tuesday, June 01 2004 @ 11:15 PM EDT
Hemorrhaging money - Authored by: fxbushman on Tuesday, June 01 2004 @ 09:56 PM EDT
Hemorrhaging money - Authored by: Anonymous on Wednesday, June 02 2004 @ 04:11 AM EDT
Not enough lawyers? - Authored by: Anonymous on Wednesday, June 02 2004 @ 06:31 AM EDT
Not enough lawyers? - Authored by: wvhillbilly on Wednesday, June 02 2004 @ 09:45 AM EDT
Linus said the fairy godmother was on our side - Authored by: Anonymous on Wednesday, June 02 2004 @ 04:40 AM EDT
Linus said the fairy godmother was on our side - Authored by: kenryan on Wednesday, June 02 2004 @ 04:36 PM EDT
If I was paying someone so little for something they'd paid so much for, I would
be worried that Baystar would want to dump a large lump of shares and repurchase
them at a slower pace once they've trashed the share price and terrified a few
other investors, so the limits on Baystars sales makes sense. You should never
assume the other side in business will behave rationally, or morally, or you
will be screwed over.
Of course it IS still a big red warning flag to any potential future investor
that a VC bit the bullet and took a loss of those proportions with restrictions
that makes it harder for them to even recoup what they were offered on paper.
Anyone investing in SCO at this stage must either be brain damaged, or have an
agenda, so hopefully this means their cash sources are all but dried up.
Let sit and watch them bleed dry.
Baystar is not "Ahead" - Authored by: _Arthur on Tuesday, June 01 2004 @ 08:53 PM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: Anonymous on Tuesday, June 01 2004 @ 09:08 PM EDT
A couple things -
1. It gives us some idea how much loss RBC incurred in their investment.
2. The limitation on daily sales of stock is very common. I've seen it in more than one ocassions when a preferred stock investor "cash in". So there's nothing new there.
3. The more pressing question is how it affects SCO's liquity and warchest to fight this battle. Interesting reference in the press release is the "liquidation" preference. May be they can't spin in any other positive way, or they simply throw in the towel.
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: Tyro on Tuesday, June 01 2004 @ 07:48 PM EDT
Is it just me, or does this mean a huge profit for SCO?
Someone please follow my calculation (everything in millions)
Baystar gives SCO 20 cash for 'preferred shares'
RBC gives SCO 30 cash for 'preferred shares'
SCO gives RBC 10 cash, 20 'normal shares' (valued at a loss)
SCO gives Baystar 5 cash + 'some shares' (valued at a loss)
Surely SCO are now sitting on some cash for doing nothing? In a 'true economic
market' does this mean their stock is therefore more valuable and should rise on
this news (not taking into account the obvious FUD/spin type stuff which
influences shares).
Baystar is just a conduit - Authored by: Anonymous on Tuesday, June 01 2004 @ 08:10 PM EDT
So is this money laundering? - Authored by: Anonymous on Tuesday, June 01 2004 @ 10:30 PM EDT
Plausable excuse - Authored by: Anonymous on Tuesday, June 01 2004 @ 11:58 PM EDT
Plausable excuse - Authored by: Anonymous on Wednesday, June 02 2004 @ 09:11 AM EDT
Plausable excuse - Authored by: Anonymous on Wednesday, June 02 2004 @ 04:12 PM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: Darkside on Tuesday, June 01 2004 @ 09:50 PM EDT
Whuh? Isn't that a LOSS, fella? - Authored by: Anonymous on Tuesday, June 01 2004 @ 11:29 PM EDT
Whuh? Isn't that a LOSS, fella? - Authored by: Anonymous on Wednesday, June 02 2004 @ 07:11 AM EDT
Whuh? Isn't that a LOSS, fella? - Authored by: wvhillbilly on Wednesday, June 02 2004 @ 10:28 AM EDT
Whuh? Isn't that a LOSS, fella? - Authored by: _Arthur on Wednesday, June 02 2004 @ 11:01 AM EDT
Whuh? Isn't that a LOSS, fella? - Authored by: Anonymous on Wednesday, June 02 2004 @ 01:02 PM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: k12linux on Friday, June 04 2004 @ 12:44 PM EDT
Your numbers are wrong - Authored by: Anonymous on Tuesday, June 01 2004 @ 08:04 PM EDT
SCO buyback plan - Authored by: Anonymous on Wednesday, June 02 2004 @ 05:27 AM EDT
So why the delay in the conference call?
The conference cal is to discuss their Q2 results. Q2 ended some time ago. This
has asolutely nothing to do with Q2, there is no reasonable way that any of this
can be used to make those results look any more palatable.
So why the delay in the conference call? - Authored by: Rob M on Tuesday, June 01 2004 @ 07:39 PM EDT
So why the delay in the conference call? - Authored by: Anonymous on Tuesday, June 01 2004 @ 07:58 PM EDT
So why the delay in the conference call? - Authored by: vtleslie on Tuesday, June 01 2004 @ 08:20 PM EDT
So why the delay in the conference call? - Authored by: Anonymous on Wednesday, June 02 2004 @ 11:00 AM EDT
Possible reason for delay - Authored by: Scorpio on Wednesday, June 02 2004 @ 09:51 AM EDT
Authored by: eamacnaghten on Tuesday, June 01 2004 @ 07:17 PM EDT
I confess, I interpretted todays events as....
SCO is in the departure lounge, and BaysStar got out before ground zero with as
good a deal as they could engineer - including at one point threatening SCO with
termination.
I do not see how this is good for SCO shareholders.
Seeing the good news... - Authored by: the_flatlander on Tuesday, June 01 2004 @ 07:33 PM EDT
Seeing the good news... - Authored by: tyche on Tuesday, June 01 2004 @ 07:38 PM EDT
Seeing the good news... - Authored by: Peter H. Salus on Tuesday, June 01 2004 @ 07:45 PM EDT
Seeing the good news... - Authored by: Anonymous on Tuesday, June 01 2004 @ 08:45 PM EDT
Until... - Authored by: Anonymous on Wednesday, June 02 2004 @ 07:58 PM EDT
Seeing the good news... - Authored by: markhb on Wednesday, June 02 2004 @ 09:50 AM EDT
Who would chose to lose this much money?
This is where I do not get big money stuff. Baystar could have extracted 2 or 3
times that ammount. Even if sco fought them, the legal fees would not be that
much. Today they got $13M and ~$10m in shares = $23M for what could have been
upwards of $40M - up to $52M?. Even if rbc sold to them at a big loss, that is
still money that they could have had.
Then even the analyst spins it as a good cut-and-run action. What about only a
few months ago when this was a 'strong buy'? There have been ZERO trial
decisions on this case, so nothing should have changed in this respect if ay due
dillegence was performed. In fact, sco has been granted most discovery requests
and the defenants have done nothing more than state their cases. Did sco/old
supporters expect IBM to just roll over? Was it all just because these gullable
people believed the sco line about the 'millions of lines' of code? If so, sco
should take up selling Florida swamp land, ad there are at least 3 didoiots in
the 'analyst' field that would surely buy from them.
Who would chose to lose this much money? - Authored by: Anonymous on Tuesday, June 01 2004 @ 07:32 PM EDT
Nah... Just bad math - Authored by: darkonc on Tuesday, June 01 2004 @ 09:22 PM EDT
Who would chose to lose this much money? - Authored by: Oloryn on Tuesday, June 01 2004 @ 10:53 PM EDT
Who would chose to lose this much money? - Authored by: Anonymous on Wednesday, June 02 2004 @ 07:58 AM EDT
Who would chose to lose this much money? - Authored by: Darkside on Tuesday, June 01 2004 @ 09:32 PM EDT
Your ship comes in: scenario - Authored by: AllParadox on Tuesday, June 01 2004 @ 10:32 PM EDT
Your ship comes in: scenario - Authored by: Anonymous on Wednesday, June 02 2004 @ 03:28 AM EDT
Only if it is all there is. - Authored by: Anonymous on Wednesday, June 02 2004 @ 01:59 AM EDT
Couldn't - Authored by: Anonymous on Wednesday, June 02 2004 @ 07:34 AM EDT
Who would chose to lose this much money? - Authored by: Paul Shirley on Wednesday, June 02 2004 @ 08:25 AM EDT
SCO: No longer "owners" of the UNIX Operating System!
Authored by: dogsbestfriend on Tuesday, June 01 2004 @ 07:31 PM EDT
Is it just me, or did someone else notice that this ol' favourite is missing
from their press release? They also correctly attribute UNIX to the Open
Group...
SCO: No longer "owners" of the UNIX Operating System! - Authored by: Anonymous on Tuesday, June 01 2004 @ 07:45 PM EDT
SCOG admits to Caldera existing! - Authored by: Anonymous on Tuesday, June 01 2004 @ 08:15 PM EDT
SCOG admits to Caldera existing! - Authored by: Arker on Tuesday, June 01 2004 @ 10:12 PM EDT
Too Late - SCOG admits to Caldera existing! - Authored by: tangomike on Tuesday, June 01 2004 @ 11:54 PM EDT
Yeah, but: - Authored by: Anonymous on Wednesday, June 02 2004 @ 07:39 AM EDT
Not quite... - Authored by: Anonymous on Wednesday, June 02 2004 @ 07:25 PM EDT
SEC reporting rules.
Authored by: AdamBaker on Tuesday, June 01 2004 @ 07:33 PM EDT
Interestingly, this makes BayStar an ~15% owner and hence subject to SEC reporting rules for insiders - we should get to see how fast they decide to cash out at SCO's SEC page
The latest info up there at the moment is Ryan Tibbets buying his newly matured options at $5.05 per share and not selling the same day. I bet he didn't like todays closing price.
While we are on the subject of share dealings someone sold 150K shares in one block today shortly before this announcement. Is it possible that someone who doesn't agree with Dion's assessment that this will be neutral to good for shareholders got wind of the deal?
SEC reporting rules. - Authored by: Rob M on Tuesday, June 01 2004 @ 07:41 PM EDT
Authored by: George_Wa_State on Tuesday, June 01 2004 @ 07:48 PM EDT
SCO's stock is ...
Down $0.38 (7.32%) @ $4.81 at last trade.
With a sharp drop to $4.71 just a few minutes
after 12:00pm.
What time was the announcment made?
OT: Summary of the whole mess for a newcomer?
Authored by: Khym Chanur on Tuesday, June 01 2004 @ 07:54 PM EDT
While Groklaw has lots and lots of detailed data and analysis for us folks who like following it, there doesn't seem to be any one-page summary of why SCO's position is so completely wrong. We should put together something like that, then put a prominent link to it in the sidebar, like the "Letter to SCO" link.
Give a man a match, and he'll be warm for a minute, but set him on fire, and he'll be warm for the rest of his life. (Paraphrased from Terry Pratchett)
OT: Summary of the whole mess for a newcomer? - Authored by: Anonymous on Wednesday, June 02 2004 @ 08:10 AM EDT
OT: Summary of the whole mess for a newcomer? - Authored by: wvhillbilly on Wednesday, June 02 2004 @ 11:16 AM EDT
OT: Summary of the whole mess for a newcomer? - Authored by: Anonymous on Wednesday, June 02 2004 @ 03:33 PM EDT
OT: Summary of the whole mess for a newcomer? - Authored by: Anonymous on Thursday, June 03 2004 @ 07:13 AM EDT
RBC Couldn't Sell Too Fast?
Authored by: hardcode57 on Tuesday, June 01 2004 @ 07:56 PM EDT
Interesting: if the RBC shares were issued on the same slow-sell basis, that
would explain why we didn't see the stock being rapidly dumped. Of course, if
Dion C is wrong about BayStar's intentions, this kind of deal could see a
rapidly accelerating volume of downward trading at some time in the future.
whoa! wait! wait! wait!
Authored by: garbage on Tuesday, June 01 2004 @ 07:57 PM EDT
Let me get this straight, SCOX is now expending their remaining fast
dissappearing capital to repurchase stock at a massive 50% loss to the investor
and this is a good thing..?
This is surreal...
Repurchasing stock at a loss to
investor's is the last desperate stand of an imploding company.
Sco "sells" linux licenses to BayStar.
I wonder how many free linux-licenses BayStar got with those 13 million :)
Sco "sells" linux licenses to BayStar. - Authored by: midav on Tuesday, June 01 2004 @ 09:50 PM EDT
Sco "sells" linux licenses to BayStar. - Authored by: Anonymous on Tuesday, June 01 2004 @ 11:24 PM EDT
Community reaction towards Baystar?
<cut to scene of the wonderfully animated donkey of Shrek>
<long pause>
<insert extreme sudden and loud/boisterous laughter>
<donkey rolling on ground continuing to laugh>
<cut to Baystar execs revealing what appears to be the
faces that just learned they have been dooped>
You forgot - Authored by: Anonymous on Wednesday, June 02 2004 @ 07:42 AM EDT
Baystar probably already made a bundle by shorting this stock. Then they
short-changed themselves on face value. Yeah, the real intentions has neven just
been money, but the lawsuit, what with Microsoft match-making and the like. It
is to keep up the pressure on the lawsuits. Baystar already said that much. They
hold on to a token sum of shares to give the impression that there is a high
probability of winning, so that people don't dump too fast. But again, it is the
real intentions that count : FUD and slowing down Linux adoption. Baystar has
and will always be a front. What is 20 million to someone that has thousands of
times more than that, and to a company that makes that in a day?
But it hasn't worked very well - Authored by: Anonymous on Wednesday, June 02 2004 @ 04:17 AM EDT
As seen on Slashdot...
Authored by: Jude on Tuesday, June 01 2004 @ 08:31 PM EDT
How to make a small fortune on SCO stock:
First, start with a large fortune...
Just when does this deal close?
Authored by: moogy on Tuesday, June 01 2004 @ 08:39 PM EDT
"These factors that could cause actual results to
differ materially from those anticipated include
the risk that the transaction described in this
press release may not close..."
There better not be a stock price manipulation
scam behind this announcement!
Mike Tuxford - irc.fdfnet.net #Groklaw
First they ignore you, then they laugh at you,
then they fight you, then you win. --Gandhi
RBC's "client" and the SEC?
Authored by: scott_R on Tuesday, June 01 2004 @ 08:49 PM EDT
Okay, now my head is spinning.
Assuming RBC's client wasn't somebody with an interest in killing Linux (or
perhaps especially if it was), wouldn't this be a good reason for the SEC to
step in and have a good, solid, public look around? Baystar admits having a
close relationship to management (even if it's not particularly friendly),
Baystar buys RBC's investment for pennies on the dollar while likely being aware
of and/or arranging the buyback, and "investor(s)" gets totally
scrammed for millions, while Baystar can polish up it's losses a little.
At the very least, I hope stock market journalists (though some aren't any
better than the SCO pundits) raise the issue. If for no other reason, because
this can blow up in the market's face. It's one thing to get scrammed in the
market, it's another for the companies to go out of their way to do it with a
smile. Without blind faith in wall street, the economy's doomed. :)
Great way to finance sco and retreat before counter stroke from IBM - Authored by: Anonymous on Tuesday, June 01 2004 @ 10:36 PM EDT
Great way to finance sco and retreat before counter stroke from IBM - Authored by: scott_R on Wednesday, June 02 2004 @ 02:20 AM EDT
Three words:
Cut... And... Run...
Authored by: Waterman on Tuesday, June 01 2004 @ 09:20 PM EDT
At today's trading rate they could sell 26,000 shares a day. It would take them
~100 days to get rid of the common stock at that rate. ( Rough figures)
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: Khym Chanur on Tuesday, June 01 2004 @ 11:51 PM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: SteveJohnson on Wednesday, June 02 2004 @ 01:02 AM EDT
How long for BayStar to sell all the shares - Authored by: Anonymous on Wednesday, June 02 2004 @ 08:06 AM EDT
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: crs17 on Wednesday, June 02 2004 @ 05:32 PM EDT
The real significance - and conference call is bound to expose it
The real significance of the BayStar thing is that it shows that BayStar have no
faith in SCO's position
BayStar just took a $20m bath, to stop themselves taking a $40m bath (i.e.
losing the entire investment)
If BayStar thought SCO was going to return a positive ROI in the long-run then
they wouldn't be doing this.
If BayStar thought SCO would survive the case, they would hang in there and sue
for the whole $40m. They believe that the chances of getting $40m back in 2 or 3
years time, is nil.
Therefore better to get $20m back now, even if it means an immediate $20m loss.
An interesting aspect is despite Blake's protests about how this demonstrates
BayStar's continued faith in SCO, the more it demonstrates the opposite.
The more SCO emphasize how common stock holders are getting a great deal as a
result of this, the more they are also emphasizing how BayStar get stiffed.
Now the thing is, BayStar got stiffed, with BayStar's consent.
And the only reason that any corporation agrees to get stiffed now, is to avoid
get stiffed even worse later.
This is very strong supporting evidence that BayStar did indeed choose the lose
$20m now, to avoid losing the whole $40m. And once again, that emphasizes the
BayStar don't expect to have any other alternative route to recover their money,
since BayStar realizes SCO is doomed.
BayStar can not of course say any of this, as they want to maintain the SCO
stock price while BayStar deposes of their common stock (which could take some
time).
Lastly why did BayStar bail out RBC, when BayStar was planning to take a bath of
this magnitude? The answer should be obvious...
RBC could have bailed immediately and tried to recover something, if not much.
This would have effectively destroyed most of BayStar's investment, and BayStar
couldn't afford this (less so than RBC).
So BayStar got stiffed several times over:
(1) By SCO initially (they believed enough to want invest)
(2) When BayStar wanted to redeem, SCO essentially said "so sue me".
BayStar suing SCO would destroy BayStar's investment's value, so SCO called
BayStar's bluff here.
(3) RBC also wanted to redeem (possibly as a result of BayStar wanting to
redeem), and this puts BayStar even more over a barrel
(4) So, to recover anything, BayStar have to bail out RBC, and then take a $20m
bath with this deal.
It couldn't happen to a nicer bunch of folks.
But they love it! - Authored by: Anonymous on Wednesday, June 02 2004 @ 02:16 PM EDT
$20 million bath? check your assumptions - Authored by: jdg on Wednesday, June 02 2004 @ 03:39 PM EDT
They're not burning up cash fast enough
SCO is burning through cash very rapidly, but, I'm afraid, not quite rapidly
enough. Let's do some math with the new numbers, shall we?
We know from SCO's March 03 conference call that they had 64 million dollars in
cash on hand. I'm not one apt to take SCO's word for things, but given the memo
that came out about the October email in which SCO said MS had given em 89
million, that doesn't sound unreasonable. Also, they gotta at least be aware
that the SEC is at the very least keeping a close eye on them (and probably
more), so I'm not sure if they'd Enron their earnings reports. But who knows.
Anyways, that earnings report also indicated that (after weeding out the garbage
concernings "stock conversions", etc) they lost ~5 million in the
first quarter, including ~3.5 million from legal fees. That day they filed the
DC and AZ suits, so they had spent a lot of time/money analyzing those and
getting em ready during Q1 (i.e. they basically had the same 5 suits in Q1 as
they now have in Q2). Indeed, they stated on their report, "Expenses
associated with SCOsource initiatives for the next three quarters are expected
to remain consistent with expenses incurred in the first quarter of fiscal year
2004". Probably true unless they launch more lawsuits. But let's suppose
that slowly increases to 4 or 5 mill per quarter.
Anyways, Unix revenue was around 11 million, and had declined about a million
from the previous year. Let's assume that decline continues at that rate...
I'm sure my numbers are off a little (we'll know for sure when Q2 earnings
report comes out), but let's do the math. Taking out the 13 million they just
paid Baystar with, and that still leaves them with around fifty million left,
minus losses from this quarter. If they continue to lose 5 million a quarter
(or even suppose that increases to 6-8 million per quarter), that still leaves
them with a couple years worth of money to burn through (50 mill is a lot of
dough). And that's even assuming MS doesn't fund em further, which is very
presumptuous.
Until they start losing the lawsuits, of course. Then all that money simply
becomes rewards for IBM and Red Hat...
They're not burning up cash fast enough - Authored by: _Arthur on Tuesday, June 01 2004 @ 10:24 PM EDT
It is worst than you think. - Authored by: tmw1735 on Wednesday, June 02 2004 @ 12:13 AM EDT
It is worst than you think. - Authored by: Anonymous on Wednesday, June 02 2004 @ 04:46 AM EDT
It is worst than you think. - Authored by: turambar386 on Wednesday, June 02 2004 @ 08:40 AM EDT
They're not burning up cash fast enough - Authored by: Anonymous on Wednesday, June 02 2004 @ 01:56 PM EDT
Baystar out of pocket? Maybe not.
Authored by: belzecue on Tuesday, June 01 2004 @ 10:32 PM EDT
BAYSTAR: [stuffing money into wallet] "... Pay no attention to the man
behind the curtain..."
Court dates - Novell?
Authored by: Thomas Frayne on Tuesday, June 01 2004 @ 10:48 PM EDT
I didn't see what might be the most significant court date mentioned in that
article, probably because the date is uncertain.
Judge Kimball has taken two motions in the Novell case under advisement, and I
expect to see a ruling any day now, with the remand denied, and the dismissal
granted.
If the dismissal is granted on the grounds that the APA plus Amendment 2 did not
transfer the copyrights, then all of SCOG's lawsuits fall flat on their faces.
This risk should keep a damper on the price of SCOX, and Baystar might not be
able to sell any until after the ruling has been made, since they have to wait
for registration.
Court dates - Novell? [humor] - Authored by: Fabrice on Wednesday, June 02 2004 @ 12:39 AM EDT
Court dates - Novell? - Authored by: darthaggie on Wednesday, June 02 2004 @ 09:28 AM EDT
``We believe that this is a very good deal for SCOX shareholders as the company relieves itself of a major disgruntled investor ...''
I suspect that Baystar's take on this would be written more accurately as:
... a very good deal for SCOX shareholders as the company relieves itself on a major disgruntled investor ...
Baystar's got to feel thoroughly screwed by SCOX. I'll bet the next time an Microsoft exec calls up Baystar, he'll be told ``I'm sorry but everyone's in a very important meeting and I'm told that they're not to be disturbed.''.
Nope - Authored by: Anonymous on Wednesday, June 02 2004 @ 09:26 AM EDT
I have to admit
Authored by: Scriptwriter on Tuesday, June 01 2004 @ 11:27 PM EDT
I have to admit that when I first read the title of this article I read it as
"Baystar Can't Sell Fast Enough," as in, they were most anxious to get
rid of a USDA prime grade A turkey. :)
Only the heir to the throne of the kingdom of idiots would fight a war on twelve
fronts.
irc.fdfnet.net #groklaw
I have to admit - Authored by: PJ on Wednesday, June 02 2004 @ 12:45 AM EDT
Me too... - Authored by: Anonymous on Wednesday, June 02 2004 @ 05:53 AM EDT
Expiry date... - Authored by: Anonymous on Wednesday, June 02 2004 @ 06:14 AM EDT
Nobody's losing money here (except the idiots that allowed Baystar to short SCO stock)
So, what's really going on here? Baystar's been shorting SCO stock for months.
Now it trades in its preferred shares for 2 million common shares (and some say
in how the business is run, at least for a little while). Next Baystar will
sell its shares and pocket the cash. Pump and dump.
Baystar was always going to make money - if the stock went up or down. That's
what everyone's missing here: it ain't about SCO or IP or the lawsuits. It's
about Baystar leveraging its interest in SCO for its own financial game. End of
Nobody's losing money here (except the idiots that allowed Baystar to short SCO stock) - Authored by: Anonymous on Wednesday, June 02 2004 @ 12:52 AM EDT
Yes, but - Authored by: Anonymous on Wednesday, June 02 2004 @ 09:28 AM EDT
Wrong - shorting stock creates riskless arbitrage - Authored by: Anonymous on Wednesday, June 02 2004 @ 09:00 AM EDT
One way of looking at this.
Authored by: davcefai on Wednesday, June 02 2004 @ 01:17 AM EDT
Does this loook reasonable:
1. Baystar/RBC/Others_through_RBC invested $50M in the belief that they were
then going to get their share of $699 or $1399 from each of us.
2. They then realised that they were NOT going to be able to prey on us, so they
cut and ran.
3. Possibly this was a way for MS (or someone else) to pump money into SCO, to
harm Linux
4. The result of all this was that SCO's coffers were enlarged.
5. We don't want SCO to go belly up until they have lost all their lawsuits.
6. Therefore, all of this was a good thing from our viewpoint. SCO's death has
been delayed, vultures have lost some money.
Interesting COMPUTER WORLD article on this
Authored by: royc on Wednesday, June 02 2004 @ 03:51 AM EDT
COMPUTER WORLD has an interesting article today on this event.
http://www.computerworld.com.au/index.php/id;1948670779;fp;16;fpid;0
"As part of the deal with BayStar, SCO has also agreed to focus on
protecting its intellectual property (IP) and deemphasize its Unix business,
according to a source close to the transaction. Additionally, SCO has agreed to
keep a lower profile in the media, the source said."
End Quote.
Does anyone really believe this "new focus" will really take place??
Interesting COMPUTER WORLD article on this - Authored by: Anonymous on Wednesday, June 02 2004 @ 05:30 AM EDT
I don't think there is a choice - Authored by: ray08 on Wednesday, June 02 2004 @ 10:55 AM EDT
This was all done strangely
Authored by: Anonymous on Wednesday, June 02 2004 @ 04:37 AM EDT
There's more to this story than the face value and it seems a little odd. First, why did SCOX delay their quarterly results conference call? They said because they needed to omplete the accounting for this Baystar deal. But that doesn't make any sense. The only figures the Baystar deal changes is the shares outstanding, the cash on hand, and the per-share figures - probably 4 numbers in total, all of which are trivial to calculate.
I see no reason why they couldn't have had the conference call on tomorrow, as scheduled. Delaying an earning announcement is often taken as a quite negative sign if there isn't a good explanation.
Also there was the timing of the announcements. As listed on CBSMarketwatch.com, the repurchase announcement was released at 3:50pm Tuesday and the conference call announcement at 3:55. Both of these times are just BEFORE the close of the market and SCOX's price fell (predictably) at both 3:50 and 3:55 (chart here) Big announcements are supposed to be made after the market is closed. Did SCOX not bother to synchronize their clocks with the market clock?
This was all done strangely - Authored by: davcefai on Wednesday, June 02 2004 @ 12:25 PM EDT
With the novell rulings soon to come, BayStar wanted out before SCO closed
A ruling against SCO would not only have all of its current court cases
effectively killed (except for parts of the IBM case) but it also will leave
itself open to lawsuits from those it procured "linux fees" from and
also investigations from the SEC and other Government bodies for faulsely
representing its assets, and questionable business behaviour.
I see the Novell ruling is crutial to the life or death of SCO depending on the
decision. And a ruling in novells favor will not answer the question we all need
answered, "is there unix code in linux?".
Breaking Even
Authored by: raynfala on Wednesday, June 02 2004 @ 09:27 AM EDT
Doing rough calculations in my head, this means that BayStar would have to sell
its common stock at an average sale price of $13 per share (give or take a few
nickels) to break even.
Can you say "write-off"?
Breaking Even - Authored by: darthaggie on Wednesday, June 02 2004 @ 09:41 AM EDT
SCOX is up 13% in the first few minutes (opened up
even more). Looks like the market thinks this
is good for SCO ...
SCO Repurchases BayStar's 40,000 A-1 Shares; BayStar Can't Sell Too Fast - Authored by: GLJason on Wednesday, June 02 2004 @ 01:42 PM EDT
SCO "boosts war chest"?
Authored by: skyisland on Wednesday, June 02 2004 @ 10:29 AM EDT
An interesting spin...
http://yahoo.businessweek.com/technology/content/jun2004/tc2004062_7881_tc055.ht
$37M remaining!
Authored by: _Arthur on Wednesday, June 02 2004 @ 10:45 AM EDT
According to the ZDNet article,
http://zdnet.com.com/2102-1104_2-5224103.html?tag=printthis
SCO would have $37M left, slightly less than the $45M estimated.
"SCO still has $37 million with which to defend its intellectual
property," spokesman Blake Stowell said.
We will have (hopefully) a better understanding of SCOX
finances, come next week.
_Arthur
Watch The Man Behind The Curtain
This PIPE deal, as we all know, was done to pump money into SCO. And that's
what happened, to the tune of $40 mil.
Since we know MS pointed Baystar/RBC to SCO in the first place, could they have
also agreed to cover any losses by Baystar or RBC? The whole plan may have been
to pump money to SCO without it having any connection back to MS. In the short
term, Baystar and RBC only look like idiots, but they really don't lose any
money if MS covers them.
I realize this theory has been tossed out there before, but both investors
bailed out without much fuss. No lawsuits were filed. They were only
"investors" for a few months, at best.
Watch The Man Behind The Curtain - Authored by: Anonymous on Wednesday, June 02 2004 @ 05:00 PM EDT
Who pays ? - Authored by: _Arthur on Thursday, June 03 2004 @ 02:47 PM EDT
Microsoft lost ?
Authored by: Anonymous on Wednesday, June 02 2004 @ 12:03 PM EDT
Ok. I do no remember how much Microsoft put into SCO throught Baystar. But if
they send 20M and Baystar had some documents saying they will not return this
money to Microsoft, it was not a lost to Baystar investors.
My questions:
1. is it possible ?
2. is it legal in US ?
PR3J - Brasil
liquidation preference
The most interesting part of this is that the are no significant remaining
claims on SCOX assets post-default (I havent seen the pref prospectus but I
assume they were warrants with senior claim on assets on liquidation). Now the
only relevant remaining claims will be the award in the Redhat suit and the IBM
countersuit. IBM and Redhat will then end up with SCOX "intellectual
property". Maybe they will donate it under GPL to the FSF! Or then again
maybe they'll sue each other and Novell and DCX and AZO :-)