SCO Stock Continues Downward Spiral

tobiasly writes "TechNewsWorld reports that three and a half years after SCO saw its stock price increase tenfold to US$20.50 following the filing of its lawsuit against IBM, it closed Tuesday at US$2.28 per share, or two cents less than where it was before the lawsuit. This follows a sustained slide fed by poor earnings results and courthouse reversals which, according to OSDL CEO Stuart Cohen, shows that 'Linux and open source software are bigger than any one company. Linux has won in the courts and is winning in the marketplace.'"

The end is near...

[It doesn't come easy]

Not to pick on poor ole SCO (just kidding, let's pick on em) but it's worse than that...back on March 14, 2002, they did a reverse stock split, 1 for 4, because the stock was doing so poorly. So, in fact a share would only be 57 cents today if it were not for that reverse split.

A close of $2.28 means the stock has lost about 98% of it's value over the last 7 years.

Still have a long way to go

[dtfinch]

I think they were at 60 cents before this all started.

Re:The title should read...

[It doesn't come easy]

Actually, checking Yahoo, the last insider transaction was a non-public aquisition by Darcy Mott for 51,020 shares (for $3.92 per share, so it's lost almost half it's value). Nothing majorly going on with the stock, really, except Baystar Capital was dumping their's as fast as the SEC would allow at the end of 2004. Wonder how Baystar feels about their "investment" now?

Re:Still have a long way to go

[It doesn't come easy]

I believe you are correct. Lowest close was at $0.60 on June 26, 2002.

Re:Still have a long way to go

[Amazing Quantum Man]

They did a 1 for 4 reverse split in mid '02, which brought the price up to about 2.30.

Re:Net Worth

[benna]

The market cap (total market value of all the stock) is $46.82 million, but the enterprise value, which represents the company's price to an acquirer, is $28.20 million, as a result of the substantial (relatively speaking) amount of cash on the balance sheet.

Re:Net Worth

[ZorbaTHut]

A lot of people think this is what SCO wants. "Sue IBM and get lots of money when we're bought out!" IBM, apparently, does not think this is behavior it should encourage, and so it's simply attempting to squash SCO like a bug. I've got no problem with this.

SCO CEO McBride sold 7000 shares.

[macadamia_harold]

* Opinder Bawa has one filing for having sold 15,000 shares, and another for 8,000 shares. He would appear to have sold all the shares he possesses (but he still has a lot of options).

* Robert Bench has three filings: 7000 shares, 5000 shares, and 4100 shares.

* Jeff Hunsaker sold 5000 shares at the beginning of June.

* Darl McBride sold 7000 shares just after the suit was filed.

That's millions of dollars [lwn.net] in stock sales [boosman.com]. Given that the stock price skyrocketed when they announced the lawsuit, and the executive stock dumping began shortly thereafter, what do you make of this situation?

Re:The end is near...

[Anonymous Coward]

The reference price of $2.30 was in March *2003*, after the reverse split.

Time is running out for SCO

[Animats]

Time is running out for SCO. Check the scheduling order [groklaw.net]. We're past the stalling of pretrial discovery. We're past wondering if SCO has some surprise evidence. Discovery is over. Now things speed up. Expert reports are coming in now and end on September 22. On September 25, summary judgement motions start, and undoubtedly IBM will make some. Things can only get worse for SCO in the summary judgement phase, where some or all of SCO's case may be thrown out and IBM might win on some of their counterclaims. This whole thing could end in September.

If not, trial starts in February 2007.

Re:Can stock prices go negative?

[ZorbaTHut]

In theory, the realistic minimum price for a stock is the point at which the stock is worth precisely the company's assets. A company with a net value of 20 million, with 1 million outstanding shares, would therefore have an absolute minimum price of $20/share. (This isn't actually true, but if your stockholders believe your company is worth less than its asset price, perhaps it really is time to just break the company up for scrap.)

I suppose, if a company's assets were negative - if the company was in major debt - and there was some way to force the shareholders of the company to pay the owed money, then yes, indeed, the stock could and likely would go negative.

Possibly unfortunately, though, there's no way that can happen - although I personally would be vastly amused if all the SCO stockholders were forced to pay IBM for owning part of such a doomed company, I suppose it would open up an incredible number of legal problems :)

Re:The title should read...

[killjoe]

Chances are baystar didn't lose a cent on the deal. First of all they had hedges, secondly they were merely a conduit for MS money. MS will make sure they get re-imbursed one way or another.

Purchase == liability

[gvc]

If somebody were to purchase the company, they'd acquire its liabilities, too. Pending lawsuits with Novell, IBM, RedHat, AutoZone, as well as many more potential ones. These claims and counterclaims don't just "go away" if the company changes hands.

Liquidation is the only solution.

Re:bowl circler

[rfunches]

When would you cover this one? There may be residual value at some point (office space, chairs etc). 20.5->0.25 or so would be my guess of maximal profit.

Book value on SCOX (assets minus liabilities, a measure of how over/undervalued a stock is) is 67 cents per share (adjusted for split) for the quarter ending 4/30/06, or a little over $14 million. It probably won't fall below .67/share.

What I find funny is that according to WSJ, there is one analyst still covering the stock with a buy rating. However, the analyst has not given any forward earnings estimates. Also shocking is just how shorted the stock is: 3.8 million shares, of only 15.1 million shares available to investors (21.09 million shares total outstanding). 25% of SCOX's public float is being shorted! And, if that isn't enough, look at this 8-K SEC filing:

Effective as of July 1, 2006, The SCO Group, Inc. (the "Company"), provided a salary increase for Sandeep Gupta, Chief Technology Officer of the Company. Mr. Gupta's annualized base salary was increased from $150,000 to $165,000. In addition, a one-time bonus of approximately $2,400 was provided for Mr. Gupta.

I do not own SCOX or any of the companies involved in SCO litigation.

Re:Downward spiral?

[RobertLTux]

no the drop from $4.00 on june 30 to the current $2.22 is called a downward spiral and just a note for the peanut gallery the IBM strategy is to not only shoot TSCOG but make it so CSI Lindon needs HAZMAT Suits to examine the crime scene. the message writ large is "DO NOT TRY THIS ON PLANET EARTH WE ARE PROFESSIONALS"

and whats worse is some of the papers seem to be passing from IBM to Novell (and Vice Versa)

Re:SCO could have done well.

[KokorHekkus]

SCO was a strong company back when they had the only commercial UNIX on Intel. They had a big presence in small companies, support from hardware vendors, and good customer service. If they would have just embraced Linux instead of seeing it as a threat, they could have been the major player in Linux for business. They just had really bad, shortsighted leadership.

Except that The SCO Group (SCOX) isn't that company. It's the company that used to be know as Caldera who bought the UNIX business from OldSCO. From what I've gathered they wanted to use the huge amounts of VARs that used SCO UNIX and push Caldera as the OS of choice instead. Apparently that didn't pan out as planned (maybe because many of the VARs were rather small and couldn't change course without significant costs).

Then comes plan B into play: who can we sue?

That's nothing - look at GTW to see real scam

[walterbyrd]

If you want to see real insider selling in a total tech scam look at GTW. On Friday GTW tanked 12% on > 2X normal volume to hit it's all time low.

CEO, and long time scam artist, Lap Shun Hui has been dumping his free shares by the millions, and not properly reporting his sales. Apparently the guy is above the law.

There has been very little insider selling involved in the scox-scam.

Buying scox == buying lawsuits against you

[walterbyrd]

Scox is not just suing, scox is being sued. Buy IBM, RedHat, and Novell, and maybe others. Others may join in later. Class action lawsuits are not out of the question.

These lawsuits are no problem for scox, because scox plans on going bankrupt. But, if IBM bought scox, IBM would inheret all the lawsuits.

Why do you think msft decided to sue by proxie?

Re:A big company crushing a smaller one...

[kirun]

Yes, it would be such an injustice if SCO were actually forced to prove their case. If SCO's only way of winning is by making sure IBM doesn't have enough time to discover the legitimate source of whatever SCO picks out of a hat, then they don't have a case, and should lose. If there is no legitimate source for the code in question, IBM can't magic one up. The only reason for SCO to stall giving evidence is that they don't have any, gambled on their bluff paying off, and lost. It's a rather twisted idea of a fair trial to insist that just because somebody has less resources, they should be allowed to get away with not having their evidence examined properly.

Re:Still have a long way to go

[Anonymous Coward]

The price you are quoting was before the its case against IBM. SCO sued IBM for infringements in March 6, 2003 and its share price peaked to $22.29 in October 2003. The share price started to drop gradually in 2004 and dropped to $4 in mid 2004. The share price was more or less the same in till mid June 2006. It has started to decline afterwards to the current level.

If you see the balance sheet of the SCO, their revenue peaked in 2003, the year it sued IBM and declined afterwards. Also its cash flow statement was positive only in the year 2003. Basically SCO is a dead snake tried to surrogate itself by suing IBM.

More at
Google Finance SCO Page [google.com]
SCO Finace Statements [google.com]
SCO's stock price - Jan 2000 - till date [yahoo.com]

Re:A big company crushing a smaller one...

[pyrrhonist]

You can argue that SCO are stalling, you could also argue that IBM are holding up the trial by demanding evidence up front.

LOL. That's what you're supposed to do. It's called discovery. You can't file a claim against someone without showing them the evidence you have against them regarding that claim. This enables them to mount a defense. Both SCO and IBM have asked for evidence as part of the discovery process.

On December 12, 2003, SCO was ordered by Judge Wells, "...to identify and state with specificity the source code(s) that SCO is claiming form the basis of their action against IBM". SCO claimed that they couldn't do this without access to IBM's code, and requested the entire source base to both AIX and Dynix including all versions and changes. SCO's motion was granted by Judge wells.

On March 18, 2005, IBM delivered to SCO everything they had requested. The 80 GB of code and a server machine to put it on was was delivered on time. SCO, then claimed that this information wasn't enough.

SCO has been objecting in one way or another to a judge's order for almost three years.

Who is holding up the trial again?