BayStar Capital has invested in SCO to the tune of $50 million. They call it a private investment transaction. I call it a "raise the value of your stock by nonsensical research reports and other tricks and then profit from the increased value of your stock", but I'm no stock guru, so I could be imagining things.
Maybe it's the other way around, namely that DB knew this was in the works, and so they put out a report to try to look like they are geniuses. All I know for sure is it's a mighty funny coincidence. On the other hand, coincidences do sometimes happen.
This could explain a lot, don't you think, about recent events with the stock price, which apparently BayStar Capital was too stupid to see through? I presume this means there is now money to get from SCO when they lose in court, so Canopy guys can stop worrying about their own pile. Or at least that may be the hope. BayStar put their money on the wrong pony. But if they choose to throw money away, it's fine with me.
So, let me get this straight: the 75th fastest growing company in the US according to Deloitte's Fast 500 list needed to raise some money to keep going. Hmm. Makes you wonder about the economy -- or about Deloitte's Fast 500 evaluation, eh?
Here is the press release (note original press release has been taken down, brackets around the numbers removed and the new press release put up at the new location. The old one was here and it read: "The investment in SCO was structured as a private placement of non-voting Series A Convertible Preferred Shares, convertible into common equity at a fixed conversion price of [$16.93] per share, which was the average closing bid price for the Company's common stock for the five previous trading days prior to the date of closing. Upon conversion, BayStar will own an aggregate of approximately [2,953,000] shares of SCO common stock representing [17.5%] of the company's outstanding shares." ), and after we read it, it's time to research BayStar, natch, starting here and here :
"The SCO Group Closes $50 Million Equity Financing
Thursday October 16, 4:31 pm ET
$50 Million Private Investment Transaction Led by BayStar Capital Provides SCO With Funding for Future Software Development, SCOx Web Services Partnerships And Acquisitions, Future Licensing Opportunities and the Protection of the Company's Intellectual Property Assets
LINDON, Utah, Oct. 16 /PRNewswire-FirstCall/ -- The SCOŽ Group (SCO) (Nasdaq: SCOX - News), the owner of the UNIX operating system, today announced it has received a $50 million private investment led by BayStar Capital, an investment fund that is a leader in providing negotiated private equity placements in publicly traded companies. The investment in SCO was structured as a private placement of non-voting Series A Convertible Preferred Shares, convertible into common equity at a fixed conversion price of [$16.93] per share, which was the average closing bid price for the Company's common stock for the five previous trading days prior to the date of closing. Upon conversion, BayStar will own an aggregate of approximately [2,953,000] shares of SCO common stock representing [17.5%] of the company's outstanding shares.
The net proceeds from the private placement, combined with the Company's cash balance reported for its third quarter ended July 31, 2003, will provide the Company with a cash position of approximately [$61.0] million. The increase in cash will significantly enhance the overall financial strength of SCO while providing substantial additional funding for business objectives including future UNIX and SCOx Web Services software development, new strategic partnerships, and protection of the Company's UNIX intellectual property and related programs.
"The momentum in the marketplace continues to shift in SCO's direction," said Darl McBride, president and CEO, The SCO Group. "Over recent months, we have made significant strides forward in our on-going effort to protect and enforce the Company's intellectual property rights through SCOsource. During the same period, we have been steadily strengthening our core operating business, and in the coming weeks, we look forward to providing the industry and Wall Street with additional details on our plans and initiatives. Now, with a $50 million investment from BayStar, we believe we have secured the capital necessary to fund all aspects of the long term growth of this Company."
"BayStar Capital looks to invest in growth-oriented firms with strong management, substantial market opportunity and solid, comprehensive business plans, and we believe that all of those fundamentals are in place for SCO to succeed," said Lawrence Goldfarb, General Partner, BayStar Capital. "SCO owns the most predominant UNIX software assets in the I.T. industry, has a 20 year history of providing trusted software solutions to end users around the globe, and an aggressive and seasoned management team focused on generating profitable growth."
SCO will hold a teleconference to address this investment on Friday, October 17 at 12:00 p.m. Eastern time. Participants should dial in 10 minutes prior to the start of the call and dial toll-free 1-800-811-8824 and use the confirmation code 690025. International callers should use the toll number +1-913-981-4903.
The securities sold in this private placement have not been registered under the Securities Act of 1933 and may not be offered or sold in the United State in the absence of an effective registration statement or exemption from registration requirements. The Company has agreed to file a resale registration statement on Form S-3 within 30 days after the closing of the transaction for the purposes of registering the shares of common stock underlying the shares of Series A preferred stock acquired by BayStar.
Here's what BayStar says about itself:
"BayStar Capital is a private equity crossover fund that makes direct investments in late stage privately held companies and small to medium capitalization publicly traded companies across all sectors. The firm is a leader in arranging Private Investment in Public Equity (PIPE) transactions that provide capital to companies seeking to reduce time to market, less stock dilution and lower market risk."
New feature: I've put up an IBM Timeline as a permanent page. It has everything that has happened so far and a list of future dates to watch for. There is a new link on the left side of the page "IBM Timeline". You asked for it. You got it. I'll do one on Red Hat as I can. Until the motion to dismiss is ruled on, and that should be in about a month or so, there is no timeline, except for the motions themselves.
Forbes' Dan Lyons has felt compelled to respond to the reaction he caused by his article on "Linux' Hit Men", which you can read here and I'd say it's as close to an apology as we're going to get. I'd say the letters were effective. Congratulations, everyone. Looks like his boss got our message. He asks a question which I'd like to answer. He says enforcement actions regarding the GPL will cause corporations to stay away from GPL code, and he asks if this is good for Linux. The answer is yes. We would like companies like SCO and other would-be thieves to stay away from GPL code and give up their dreams of coopting our code and "monetizing" it for themselves. We believe this would be very good for Linux. What Mr. Lyons does not comprehend, or SCO either, for that matter, is Linux doesn't need corporations. Corporations need Linux. That's the part Mr. Skiba of DB forgot to put in his equation.
I have a question for Mr. Lyons in return: Does he own any SCO stock? What are the guidelines for journalists at Forbes on such matters? Shouldn't journalists and analysts have to disclose any interest they might personally have in a story and if they have a strong interest recuse themselves, the way judges do?