LWN: Comments on "SCO Update"

Mandatory conversion

jwb — Thu, 18 Mar 2004 21:31:34 +0000

The Series A/A-1 Preferred shares are worth $1000 per share and have commensurately larger power. The common stock is owned by Yarro et. al.

Mandatory conversion

error27 — Thu, 18 Mar 2004 20:53:26 +0000

I'm not very familiar with how all this works...

How does the voting work? Yarro and Canopy together have 11 out of 14.3 million SCOX shares. Wouldn't their votes automatically out vote everyone else?

Mandatory conversion

jwb — Thu, 18 Mar 2004 19:10:41 +0000

I should also note that the Optional Redemption trigger point for Series A-1 shares has been moved up to 20 days closing below $10.50.

Mandatory conversion

jwb — Thu, 18 Mar 2004 18:45:06 +0000

From SCOX 10-Q filing, emphasis added:

The value of the Series A is classified outside of permanent equity because of certain redemption features that are outside the control of the Company.

The previous holders of the Series A Preferred Stock have been converted, as of February 5 2004, to holders of Series A-1 Preferred Stock. They now have voting rights and seats on the board, which means the holders of Series A-1 can vote to force the company's hand on the cash conversion.

SCO Update

smoogen — Thu, 18 Mar 2004 16:33:20 +0000

No because they didnt promise they would buy them back.. the weasel words are good enough that most courts would say that the stockholders should have remembered 'Caveat Emptor'(sic)

SCO Update

fandom — Thu, 18 Mar 2004 12:08:03 +0000

In case they don't buy those shares, wouldn´t it be yet another reason for a stockholder class action suit against the company?

Insurance

jmshh — Thu, 18 Mar 2004 08:41:05 +0000

There are other insurance companies for offloading part of this risk. One of many examples is Munich Re (not an endorsement, just a very big example from my home country). The problem for OSRM is how to get competitive rates for re-insuring their risk, as they will have to prove the effectiveness of their own risk assessment.

Insurance

frazier — Thu, 18 Mar 2004 05:42:01 +0000

from the article:

...the launch of Open Source Risk Management and its "open source risk protection services." OSRM will sell you an indemnification policy for free software...

Something else to remember in regards to such insurance is if a claim became necessary, would the reserves of the insurance company be deep enough to cover everything? I don't know squat about OSRM but IF they just cover a niche like this and everything were to go wrong, a policy holder would be unlikely to get full compensation as they'd not have the reserves to cover all the claims. A traditional large insurance company has a large base of premiums coming in from a large geographic area so if a city in south central Kansas gets flattened by a tornado there's money to cover the insurance claims since there's policy holders around the country with no claims. If there was just an insurance company for that small town though, regardles of overhead, the damages would greatly exceed the premium base.

Mandatory conversion

corbet — Thu, 18 Mar 2004 03:29:11 +0000

Actually, I was going to put a paragraph about that into the article this week and forgot. A lot of people have misunderstood the conversion language.

In particular, the agreement allows SCO to force conversion of the stock if the stock price goes below half the original price. It's SCO's option. There's nothing that I've found that allows BayStar to pull its money if the stock price falls.

SCO Update

error27 — Thu, 18 Mar 2004 02:36:11 +0000

The timing of the buy back is interesting. If SCOX is at $8.46 or less for 20 days then Baystar can get their money back. The deal with Baystar forbids SCO from buying stock on the open market but it does allow them to buy stock from employees. (Sorry don't have the link for that right now). Manipulating SCOX to stay above the $8.46 mark is illegal anyway.

There are around 14.3 million shares of SCOX. Yarro and the Canopy Group together own 11 million shares. Only the remaining 3.3 million shares are publically traded. I have heard that SCO employees own 1.5 million shares but I haven't verified it.