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SCO announces stock buyback program
The SCO Group has announced that
the company will be buying up to 1.5 million of its own shares.
"'This action reflects our strong belief in the fundamental value of
our intellectual property and core business,' said Ralph Yarro, chairman of
the board, The SCO Group. 'At current prices, we believe our stock
represents an attractive investment opportunity and that this action
reflects our ongoing commitment to improving long term stockholder
value.'" Right.
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Aha, so that's their trick... Posted Mar 11, 2004 3:42 UTC (Thu) by bryn (guest, #1482) [Link] So SCO can buy back their own shares. Then perhaps they can reveal the nasty REAL court case they've been hiding up their sleeves. Then they can sell their stock at huge profit and .... rule the world (cue evil maniacal laughter).
PR move or reaction to SEC rumors? Posted Mar 11, 2004 4:14 UTC (Thu) by jonathanbearak (guest, #8861) [Link] I'm not sure if this is a PR move or a reaction to the rumors of an SEC investigation. Perhaps they want to show to the SEC that they aren't dumping stock by buying it back? Of course the executives won't be buying shares back, just the company ... which would probably make the stock worth more as the execs continue to sell their stock. Quoting the press release, "up to 1.5 million shares of SCO's common stock over the next 24 months" -- so in the next *two years* they'll buy *up to* 1.5 million shares. So, if they're still around in that time, maybe they'll by back some stock.
PR move or reaction to SEC rumors? Posted Mar 11, 2004 5:11 UTC (Thu) by error27 (subscriber, #8346) [Link] I'm no stock market junkie but it seems that this could have a huge impact on the stock price.SCO's market cap is currently $136.06M. At $9.51 per share that is about 14.3 million shares. Yarro owns 5.5 million shares and the Canopy Group owns another 5.5 million shares and neither of them is trading. So really it's just 3.3 million shares being traded. SCO is talking about buying back almost half of those 3.3 million shares. Essentially all the money that SCO has left came from the pipe deal with Bay Star. At $10 per share it would only cost $15 million. SCO was never planing to pay back the money from the pipe deal so this is a clever investment for them to make.
PR move or reaction to SEC rumors? Posted Mar 11, 2004 13:53 UTC (Thu) by pyellman (guest, #4997) [Link] It's a PR move. This so-called buy back program is engineered for SCO to do exactly what it did, which is use the announcement as an opportunity to declare it a "demonstration of SCO's confidence in its business model moving forward". Yarro saw the huge declines in the stock value over the last few weeks, and felt he had to step into the breach to do something to protect his own investment. The goal here is to slow down the collapse in the stock price, giving people like Yarro a longer time frame to figure out if and how they are going to able to get money out of all the stock they hold.As for your math, note that the specific announcement is "to repurchase UP TO 1.5 million shares over 24 months" (emphasis mine). In the first place, 24 months is an awfully long time to schedule a stock buy back program, and in SCO's case could be meaningless, as any fool knows SCO's chances of even being around in its current form 2 years from now look to be less than 50%. In the second place, the statement "up to 1.5 million shares" of course does not require SCO to purchase ANY stock to fulfill the strict requirements of the statement. In the third place, no target price is given; I doubt very much that SCO will buy back much stock at prices anywhere near the current level ($9 or $10). In any case, you can be pretty sure that they are not going to throw $15 million of their cash pile into that hole without assurances of additional cash flows from Microsoft, which of course would mean that Microsoft was floating SCO's stock price -- something I have predicted they (Microsoft) would do if and when SCO's stock price began tanking, not necessarily to protect SCO executive's financial interest in SCO's stock, but because SCO's plummeting stock price will effectively neutralize all the FUD and PR SCO and Microsoft generate. That is, many if not most people (those who are not closely familiar with the facts) will correlate SCO's falling stock price with weakness in SCO's legal position and fortunes, which will lead to further declines in the stock, which will -- well, you get the idea. A scenario MS needs to try and prevent. Peter Yellman
PR move or reaction to SEC rumors? Posted Mar 14, 2004 16:50 UTC (Sun) by vonbrand (subscriber, #4458) [Link] I don't think MSFT will (continue to) support SCOX' stock. Right now, if SCOX goes down the drain ASAP, the whole mess goes to no conclusion. And then they can milk that for further FUD. At best, they would want stretch SCOX's slow death out, but not long enough for the unwashed masses to get wind of what is really going on here. But the fact in itself that MSFT is interested in this, and the fact that EV1, Computer Associates, IBM, AutoZone, DaimlerChrysler, Bank of America, et al are Linux users are powerfull pro-Linux signs, unlikely to get unnoticed. That HP, Sun and others offer indemity shows that "big players" are for Linux. This is bad for MSFT spin, they probably by now regret (helping in) stirring up this hornet's nest...
SCO announces stock buyback program Posted Mar 11, 2004 4:54 UTC (Thu) by BrucePerens (subscriber, #2510) [Link] I think they'll buy blocks of stock from Canopy. For cash. This is one way for Canopy to transfer SCO's cash to their own account.Bruce
SCO announces stock buyback program Posted Mar 11, 2004 5:02 UTC (Thu) by vblum (guest, #1151) [Link] It is also an obvious way to stop the free fall of their stock price. Your theory is attractive, but maybe their motives are simpler this time ...anyway, too bad that they can now stop the wonderful entertainment (price drop) which the last few days provided ... You should point out your theory to BayStar / RBC in any case ... :-)
SCO announces stock buyback program Posted Mar 11, 2004 5:39 UTC (Thu) by BrucePerens (subscriber, #2510) [Link] Hm. They can try to buoy it up, but will they succeed? I wonder when the short positions (said to be 30% of public stock) come due?Bruce
SCO announces stock buyback program Posted Mar 11, 2004 13:59 UTC (Thu) by jwb (subscriber, #15467) [Link] Short positions are not options contracts, they never come due. In my opinion, SCOX is trying to squeeze the short side by propping up the stock price with cash. Lots of companies have tried this and it never works, unless the company has a LOT of cash and is willing to lose it all. SCO's pile does not constitute "a lot" of cash by Wall Street standards, and the move is likely to be seen as negative.
SCO announces stock buyback program Posted Mar 11, 2004 5:27 UTC (Thu) by vblum (guest, #1151) [Link] Err, one more,didn't something in the PIPE deal trigger at $8,50,some effective "money back" clause or so? If so, at $9,27 today ther were rather close.Perhaps SCO aren't lying, and this is really an attractive investment opportunity - in the sense that without this investment the company could be broke anytime after tomorrow, if the PIPE investors chose to pull the plug?
SCO announces stock buyback program Posted Mar 11, 2004 6:33 UTC (Thu) by error27 (subscriber, #8346) [Link] I don't see a clause like that. Here is the agreement.Bay Star modified the deal later but I'm not going to dig through that tonight...
SCO announces stock buyback program Posted Mar 11, 2004 17:47 UTC (Thu) by jvoss2 (subscriber, #7065) [Link] I did not check this properly, but at least some Groklaw comment claims the same. It states that "a redemption can occur if the price is lower than half that, i.e. $8.46 for 20 consecutive trading days.."
SCO announces stock buyback program Posted Mar 11, 2004 21:46 UTC (Thu) by error27 (subscriber, #8346) [Link] Thanks for the link. It looks like you are correct.
SCO announces stock buyback program Posted Mar 15, 2004 21:00 UTC (Mon) by Jaywalk (guest, #20219) [Link] Yeah, but that thread implies that a stock price of less than $8.46 for twenty days will require SCO to cough up $50mil. If I read it correctly (and I might not have, IANAL) it looks like the choice is for SCO to buy back the shares it gave to Baystar, or Baystar gets that number of shares in common stock. I noticed that there are two triggers; if the stock goes below 50% of the conversion price or above 150% of the conversion price. If the conversion price is $16.93, that means either below $8.46 or above $25.40 for twenty days.It was above twenty for a while, so this might not have been a bad gamble for Baystar. If it continued to climb, they would have owned a hefty chunk of stock for their investment. And if the top-end trigger just meant that they could convert to common stock, they could stay on the ride as long as the stock kept going up. If it fell (as has been the case) there is a bottom line to prevent them from losing their entire investment. Since some (IMHO, clueless) analysts were predicting it would top out around $45, this might have looked like a good deal.
Buying shares from Canopy Posted Mar 11, 2004 13:32 UTC (Thu) by corbet (editor, #1) [Link] That has crossed my mind as well, especially given the reference to "privately negotiated transactions" in the PR. I suspect they may be buying stock from some insider - maybe Canopy, maybe somebody else - at "privately negotiated" prices because that insider wants out.
SCO announces stock buyback program Posted Mar 11, 2004 16:51 UTC (Thu) by dmarti (subscriber, #11625) [Link] Would Canopy have to file a registration statement with the SEC to sell any of its SCOX shares?
SCO announces stock buyback program Posted Mar 11, 2004 20:21 UTC (Thu) by pyellman (guest, #4997) [Link] I like that theory. I've never believed this was a stock-kiting scheme ala "run up the value of the stock, sell to unwitting investors, and cash out" -- I just found it hard to believe that the SCOscum would rely on selling stock on the "open market" for their payoff. I've always believed that the payoff for SCO execs and key investors would be in a series of guaranteed "golden parachute" type arrangements, complex financial and stock transactions used to mask the transfer of money from the benefactor(s) (Microsoft) to the beneficiaries. I also expect to see additional involvement of foreign entities such as Baystar and Deutsche bag, as this makes it harder to pull together evidence for any criminal or SEC investigation/prosecution. I wouldn't be surprised to see a financial institution based in Asia be the next to pop up and "support" SCO with investment/loans/stock deals. From what I read in the news, Linux has got MS bleeding $$$ over there, they're in need of some FUD to spread over that nasty wound.Peter Yellman
SCO announces stock buyback program Posted Mar 11, 2004 5:33 UTC (Thu) by gavino (guest, #16214) [Link] Perhaps SCO had a look at the chart linked by LWN http://lwn.net/Articles/75129/and realised that their legal threats are having less impact on the share price these days and they need a new tactic to pump it up! ;) Obviously SCO corporation as a body corporate is doing the buying, but who will be doing the selling? Canopy Group, company directors? I think the SEC has their work cut out for them!
SCO announces stock buyback program Posted Mar 11, 2004 6:36 UTC (Thu) by patriot (guest, #14594) [Link] Kick Ralph Yarro off Troll Tech's Board of Directors.
Railway Tycoon Posted Mar 11, 2004 16:04 UTC (Thu) by nas (subscriber, #17) [Link] This reminds me of a dirty trick I used when playing Railway Tycoon 2 (on Linux of course). The details are a little fuzzy but the plan was basically as follows. First, try to make your company look good. Real, sustainable growth wasn't the goal. You could do things that you know long term would screw the company.Once the stock price is respectable, start selling your company shares. Use company money to buy back shares and preserve the price (as much as possible). Take out as many loans as you can, sell assets, etc. For an added twist, just before you are kicked out as chairman and CEO, do a few more things to make sure the company will never come out of the hole. For example, build track in nonsense locations (maintaince will have to be paid or they will have to pay to demolish it). If you executed this correctly you could become very rich. As an added bonus, you can laugh at your competitors who were foolish enough to buy stock in your company.
Railway Tycoon Posted Mar 11, 2004 16:47 UTC (Thu) by ccchips (guest, #3222) [Link] So, as a customer, when I pay my hard-earned money for goods or services from some company like the one you describe, I'm getting screwed, right?If so, could we come up with some better way to live?
Railway Tycoon Posted Mar 11, 2004 17:20 UTC (Thu) by sandy_pond (guest, #9734) [Link] Hey ... this is what the American Dream has morphed into over the last 30 years. It used to be: work hard for a good wage and earn a comfortable living. It is now: see how much I can make without really working or producing anything.
Horatio Alger Posted Mar 11, 2004 18:25 UTC (Thu) by ncm (subscriber, #165) [Link] The canonical Horatio Alger story went something like this: work hard, be clever, marry the boss's daughter. That is the American dream, at least as it has been handed down in writing. Now, instead, it's work hard, keep your eyes peeled, sue the Boss. Not so different, really, except this way you don't have to dispose of his daughter afterward.
Horatio Alger Posted Mar 11, 2004 19:07 UTC (Thu) by rjamestaylor (guest, #339) [Link] The story is similar today except now you marry her son.
Railway Tycoon Posted Mar 11, 2004 17:53 UTC (Thu) by JoeBuck (subscriber, #2330) [Link] No, as a customer of such a company you aren't necessarily screwed. My wife loved Webvan while it lasted. Why shouldn't she? They were selling very good groceries and excellent service well below their cost, and losing money on every single delivery. Like most dot-coms, the Webvan people thought that the road to success was to grow rapidly and establish market share, and tell investors that after the time when they controlled the whole market they would somehow make money, when in reality the main plan was to go IPO and cash out. The people who timed it right made lots of money from failing dot-coms.
Who are the customers? Posted Mar 11, 2004 18:35 UTC (Thu) by ncm (subscriber, #165) [Link] Who the customers are is really quite a fluid thing. The investors thought they were investors, but they were really customers. Your wife thought she was a customer, but she really was a component of the product. The product was business plans (including market-share values) delivered to the VCs. When the customers decided they didn't like the product so much any more, they stopped buying.During the bubble there was a nearly insatiable demand for business plans, but an even less limited supply emerged.
Railway Tycoon Posted Mar 12, 2004 14:36 UTC (Fri) by MLKahnt (subscriber, #6642) [Link] I see your parallel, but I almost think that SCO is actually doing something closer to my Railway Tycoon 2 trick (also on Linux.) Take on debts, take on businesses and projects guaranteed to lose money (suing customers, and the legal costs of very poorly presented lawsuit against Big Blue) and disable the ability to travel on existing revenue generating routes (killing off the SCO Linux and UnixWare businesses) and then sell my stake, jump ship and short the stock excessively so that I'm the only one to see any profit from the company's growing weakness. The apparent value of the stocks coaxes others to rush in thinking that they can still make money there, but I still make a net profit by the overall shorting of a company that will not show another profit in its remaining existence. Not that I'm encouraging any particular market investment strategies wrt any company or in general terms...
$9.50 Stock Price Posted Mar 11, 2004 18:11 UTC (Thu) by lvteacher (guest, #14548) [Link] If I remember correctly, if the stock price is below $9.50 for 20 consecutive days it triggers a buy-back at a higher price.lvteacher
SCO closes lower anyway Posted Mar 11, 2004 23:18 UTC (Thu) by BrucePerens (subscriber, #2510) [Link] SCO closed lower again today despite the announcement of a buyback. Most likely they won't be able to prop up the value of their stock without losing too much cash.Thanks Bruce
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