Investors Bailing On SCO Stock, SCOX Plummets

HailDorothy writes "SCO's stock price is plummeting in the aftermath of Judge Kimball's ruling that Novell owns the UNIX copyrights, as we discussed earlier. '[W]e will continue to explore our options with respect to how we move forward from here,' SCO said in a public statement issued in a futile attempt to calm investors. SCO's stock price has fallen 70 percent during trading today, reaching a 52-week low. It looks like the end is near for SCO, which still owes Novell 95 percent of the SVRX UNIX royalties it collected from Microsoft and Sun through the SCOsource program. As Judge Kimbell noted in his ruling, it's unlikely that Novell will ever be able to collect on those royalties."

95%

[tomhudson]

" looks like the end is near for SCO, which still owes Novell 95 percent of the SVRX UNIX royalties it collected from Microsoft and Sun through the SCOsource program."

Actually, the deal was that SCO remits 100% to Novell, then Novell pays them a 5% commission. Kimball ruled that SCO broke their fiduciary duty to Novell; SCO is no longer able to claim the 5% commission.

The only question left is how much of the Sun and Microsoft licenses were for Novell's stuff?

How much of Microsoft/SUN is SVRX?

[Excelcia]

The text of the story is technically which says:

SCO ...still owes Novell 95 percent of the SVRX UNIX royalties it collected from Microsoft and Sun

However, it is a little misleading in that it has to be determined at trial what percentage of the Microsoft and Sun deals were for SVRX. All the trial judge said is that some amount of those deals is for SVRX. Because the judge determined that the deals weren't entirely SVRX, he couldn't determine any sort of dollar amount. It could be a trivial amount, it could be substantial.

The Financial Situation For SCO

[SEE]

As of April 30, 2007, SCO had $19.847 million in total assets (which includes no intangibles), and $12.654 million in total liabilities, according to the Reuters data [reuters.com]

The ruling on the Microsoft/Sun royalties owed to Novell adds roughly $25 million to the liabilities, making SCO worth roughly -18 million dollars, book value.

Re:Someone bought those shares today.

[danpat]

For people who don't know what a "short" is, it's where you borrow stock from the real holder, then sell it right away. Some time later, you buy it back at the new market price, and return it to its owner. The difference in what you sold the original stock and what you re-purchased it for is your profit. If the stock price rises, you lose money. If it drops, you make money.

My guess would be that a large number of short positions were closed today. Lots of people had shorted SCOX (i.e. borrowed them, then sold them at some earlier date). Today, when the price dropped, they re-bought the stock at the current market price and returned them to their owners.
I personally haven't had enough experience with the market to know how big an influx of short closers it would take to drive the stock price back up again.

Re:SCO still in the running.

[Bill, Shooter of Bul]

No, Sco basically said that they retain ownership on the parts they added to unixware( which don't affect IBM's code which predates that). It is relevant in its on going trial against Novell. part of the deal was that novell agreed to non compete with Sco as part of the deal. Sco's arguing that distributing linux ( that does have unix code in it, according to Sco ) unfairly violated the non-compete clause in their contract.

Not just a 52 week low - it's an *all time" low

[Anonymous Coward]

See http://finance.yahoo.com/q/bc?s=SCOX&t=my&l=on&z=m &q=l&c= [yahoo.com]

I don't think anybody wants to own SCO

[A nonymous Coward]

Seems to me there is a real risk for anyone to take over SCO. There are counterclaims in both Novell and IBM and SCO is likely to end up owning tons of money. Wouldn't any buyer inherit those liablities? Much more likely that SCO will go to bankruptcy where the liabilities will be washed away.

Plus, right now SCO has so little value that the only reason to pursue the counterclaims is to bury SCO. But if someone with deep pockets were to buy SCO before everything is settled, that would make pursuit of those counterclaims financially worthwhile too.

What's going to happen - according to AllParadox

[Anonymous Coward]

AllParadox is a retired lawyer who has been following the SCO cases and commenting; first on Groklaw, and more recently on InvestorVillage. He is actually an expert both on the law and on the SCO cases in particular. Here are exerpts from a few of his posts since Judge K's decision came down:

IMHO, the probability of these fools filing for Chapter 11 bankruptcy is reasonably high. I put it around 99.999%, give or take.

The forms are already prepared, they just need to be signed and filed. No, I am not an insider, and I am not privy to inside information. I even have trouble getting outside information. But the forms still have been prepared.

Filing will be soon. Probably next week, if not, then in the week after.

Furthermore, the chances of that being rapidly turned into a chapter 7 is also fairly high, around 99.9%.

 

One more option for "Andrea's Husband":

Sing. Sing like a little birdie. Sing long and loud. Bury IBM in the letters and emails and notes and appointment books and recorded telephone conversations and everything else that will prove beyond all doubt that this whole sordid mess was orchestrated and funded by Microsoft to inhibit Linux and interfere with IBM business practices.

That will, by the way, save Darl's money. If he proves that the money from Microsoft was only nominally a payment for a UnixSysV license, when in fact it was a bribe paid to SCOX for SCOX to sue IBM, then there is a plausible argument that Novell should not receive these funds as monies held by a fiduciary.

In my experience, it has a very good prospect of even keeping him out of jail, because the world will be distracted by the main event: IBM v. Bill Gates & Co. Then, a trite line from an old, old, movie will be apropos: "Feeling Lucky, Punk?"

 

Still, it is possible. There have been criminal cases where the criminal defense attorney was paid with money that could be traced back to drug deals, but only after the fact. The Government went back to the attorneys and extracted back their fees.

 

Conversion. It means the money in their hands actually belongs to someone else.

It means that whatever amount is eventually decided to belong to Novell may be recovered.

It may even be recovered from those people paid with it, if they were reasonably aware of the nature of the conversion.

I will shout here:

THIS IS NOT DISCHARGEABLE IN BANKRUPTCY. IF NOVELL ASKS FOR IT, DARL HAS TO GIVE BACK HIS PAYCHECKS. HIM AND YARRO BOTH. Novell has the burden of proof in Darl's bankruptcy, so it is not automatic, but Darl is now a busted flush.

Based on the misery that is in store for them personally, Darl, Yarro and the lawyers all have to figure out how to save their hides. They might be able to do that if they can point to any evidence that points at Microsoft. That would direct IBM's attention away from them and IBM might be grateful. Otherwise, they will probably lose all the ill-gotten gains they have accumulated so far.

Re:Someone bought those shares today.

[SEE]

If it gets low enough, someone could snag it if for no other reason than to liquidate its assets. All of those desks, computer monitors, and coffee machines have got to be worth something.

True. As of SCO's April 30th financials, SCO's Property/Plant/Equipment - Net (after depreciation) was worth $454,000.

Re:Who invested is SCO anyways?

[Sangui5]

See http://finance.yahoo.com/q/mh?s=SCOX [yahoo.com] for a list of major holders.

Mostly, it looks like large investment institutions hold the bulk of SCO shares. Probably these are part of "total market" indexes and mutual funds. Since SCOX is still listed, they would still be a component of such funds.

The best I can tell, the insiders are mostly gone. The largest holder of SCO seems to be Glenn J Krevlin. There are some articles out there linking him to some other bad smelling companies; the phrase "smoke & mirrors" seems common. SCO sounds right up his ally.

Re:Someone bought those shares today.

[Anonymous Coward]

Holders of common stock have the LAST dibs on any of the remaining assets in case of bankruptcy. First comes bondholders (which there any many) and then holders on preferred stock. With only $500,000 in assets, you are guaranteed to receive nothing if you buy common stock now.

Re:money money money

[watchingeyes]

Microsoft probably won't buy them out. Why exactly would Microsoft buy a company who's liabilities dwarf its assets 10-fold? They would be putting themselves at risk.

Re:Woohoo

[watchingeyes]

Not only that, but Novell would also have to demonstrate specific, special damages. Not "well sales dropped 20%", but "specific contract ABC was about to go through but then the negotiators for the contract called and said they weren't buying because of SCO's claims...here's an affidavit to that effect!" General and punitive damages cannot be awarded on a slander of title claim.

A website full of images ...

[Anonymous Coward]

A website just FULL of images ...

http://www.darlmcbride.com/ [darlmcbride.com] ... ready for photoshopping.

Re:Who invested is SCO anyways?

[bhalter80]

They're still not done this was filed today:

Form 8-K for SCO GROUP INC

13-Aug-2007

Other Events

Item 8.01. Other Events.
The SCO Group, Inc. ("SCO", or the "Company"), offered the following statement in response to the August 10, 2007 ruling by U.S. District Court Judge Dale A. Kimball regarding the Company's longstanding dispute with Novell over ownership of the UNIX and UnixWare copyrights:
"We are clearly disappointed by the Court's adverse ruling regarding ownership of copyrights covering the UNIX operating system. Although the district judge ruled in Novell's favor on many important issues, the case has not yet been fully vetted by the legal system and we will continue to explore our options with respect to how we move forward from here.
We note that the court ruled that SCO owns the copyrights to the technology developed or derived by SCO after Novell transferred the assets to SCO in 1995. This includes the new development of all subsequent versions of UnixWare up through the most current release of UnixWare 7.1.4 and substantial portions of SCO UnixWare Gemini 64. We also own the exclusive, worldwide license to use the UnixWare trademark, now owned by The Open Group. Also, SCO's ownership of OpenServer and its Mobile Server platforms was not challenged and remains intact. These SCO platforms continue to drive enterprises large and small, and our rapidly developing mobile business is being well received in the marketplace.
Moreover, the court did not dismiss our claims against Novell regarding the non-compete provisions of the 1995 Technology License Agreement relating to Novell's distribution of Linux to the extent implicated by the technology developed by SCO after 1995. Those issues remain to be litigated." Forward-Looking Statements:
The statements contained in this press release, including but not limited to statements regarding the Company's pending litigation and expectations concerning the Company's developing mobile business OpenServer and Mobile Server platforms and other statements that are not historical facts, 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. We wish to advise readers that a number of important factors could cause actual results to differ materially from historical results or those anticipated in such forward-looking statements. These factors include, but are not limited to, developments in the Company's litigation with Novell and IBM, continued competitive pressure on the Company's operating system products, which could impact the Company's results of operations, adverse developments in and increased or unforeseen legal costs related to the Company's litigation, the inability to devote sufficient resources to the development and marketing of the Company's products, including the Me Inc. mobile services and development platform, and the possibility that companies with whom the Company has formed partnerships will decide to terminate, or reduce the resources devoted to, their partnership with the Company. These and other factors that could cause actual results to differ materially from those anticipated are discussed in more detail in the Company's periodic and current filings with the Securities and Exchange Commission, including the Company's Form 10-K for the fiscal year ended October 31, 2006 and Form 10-Q for the fiscal quarter ended April 30, 2007. These forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update such statements to reflect events or circumstances arising after such date.

Basically saying don't leave yet we do own stuff that has value see we can even name it

Re:Darl?

[ari_j]

Note that most of the things listed in this thread are not crimes as indicated. For instance, conversion is a tort and encompasses more than just theft. Theft is also known as larceny and is a crime. Libel and slander are both forms of defamation and are generally not criminal but rather just civil torts. Etc.

Re:Here's the part that doesn't work for me on tha

[hawk]

If you look at the terms of a margin account (which allows you to pledge your shares as security to borrow, likely to purcahse more stock), you'll find that you have consented to the brokerage lending your shares for short sales. Sometimes (usually?), you consent to *any* shares that you leave in your brokerage account being lent for short sales.

hawk, esq.