SCO and BayStar still fighting
Published: 26 Jul 2004 09:10 BST
The SCO Group and BayStar Capital, the fund that arranged a crucial $50m (£27m) investment in the Linux litigator, haven't settled their disagreements after all.
SCO and BayStar appeared to have buried the hatchet in June, announcing a deal under which SCO would buy back all the preferred shares BayStar owned after an investment made in October 2003. The two firms had agreed that SCO would exchange 2,105,263 common shares and $13m for BayStar's 40,000 Series A-1 preferred shares.
On Friday, SCO said it had bought back the shares -- but BayStar said an unspecified dispute is keeping the transaction incomplete. BayStar did not elaborate.
Duelling press releases indicate that the dispute centres on SCO's disclosures about its SCOsource program, which sells Unix intellectual property. BayStar, based in Larkspur, Calif., said it plans to file a lawsuit to settle the matter.
The spat is a new wrinkle in SCO's controversial and thus far largely unsuccessful effort to profit from Linux, which the company says infringes on Unix intellectual property it claims to own.
To pay for the campaign -- including lawsuits against IBM, Novell, DaimlerChrysler and AutoZone -- BayStar Capital invested $20m and helped bring along a further $30m from the Royal Bank of Canada. RBC later backed away from the deal, converting a third of its stake into shares that could be publicly traded, selling the remainder to BayStar.
On 22 June, SCO filed a registration statement with the US Securities and Exchange Commission to issue the common shares. SCO said the SEC, on 21 July, had declared the registration statement effective, a move that fulfilled "the only condition to closing the repurchase transaction".
"Accordingly, SCO has informed BayStar that it considers the repurchase transaction to be closed as of 21 July, 2004," SCO said in its Friday statement. It sent BayStar a certificate for the new stock and said it's ready to deliver the $13m in cash.
BayStar replied that the transactions "have not closed, due to an unresolved dispute between the parties. BayStar intends to file an action requesting a declaratory judgment with respect to its rights under the Stock Repurchase Agreement," the 31 May deal that set up SCO's buyout.
SCO spokesman Blake Stowell declined to comment beyond the company's statement. BayStar general partner Larry Goldfarb did not return a call seeking comment.
According to SCO, BayStar claims that SCO has given inconsistent statements to the public and to BayStar about SCOsource licensing opportunities. The concern is baseless, according to SCO's statement: "SCO takes such questions very seriously and reaffirms the accuracy of its public disclosures concerning its SCOsource business and confirms its belief that such disclosures are not inconsistent with any confidential statements previously made to BayStar."
SCOsource has not been a financial success. Shortly after BayStar and SCO announced their settlement, SCO announced that it had received $11,000 in SCOsource revenue for the quarter ended 30 April, a drop from $20,000 three months earlier. SCOsource expenses, on the other hand, increased from $3.4m to $4.4m over the same period.
Did you find this article useful?
76 out of 136 people found this useful
- Share this article:
