Article

BayStar wants to cash out of SCO deal

Michael S. Mimoso, Editorial Director

The SCO Group Inc. revealed Friday that it has received a letter from BayStar Capital stating that the investment firm intends to redeem its 20,000 shares of SCO stock, valued at $20 million. BayStar, in a joint venture with the Royal Bank of Canada, invested $50 million in SCO last year.

The investment was ear-marked by SCO CEO Darl McBride as the primary source of revenue to pay for legal fees in the Lindon, Utah-based company's multi-billion dollar intellectual property lawsuit against IBM. SCO alleges IBM improperly donated portions of SCO's System V Unix code to the Linux kernel.

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They cited the sections of the agreement they believe we violated, but provided no detail on how they believe we breached it. We are at a loss as to how we may have done this.
Blake Stowell
Director of public relationsSCO Group Inc.

BayStar's portion of the investment is worth approximately $20 million, said SCO spokesman Blake Stowell.

BayStar is alleging that SCO has violated sections of the Exchange Agreement between the two filed with the Securities and Exchange Commission on Feb. 5.

"They cited the sections of the agreement they believe we violated, but provided no detail on how they believe we breached it," Stowell said. "We are at a loss as to how we may have done this."

BayStar spokesman Bob McGrath declined to comment.

The sections in question, 2(b)(v), 2(b)(viii), 2(b)(viii) and 3(g) outline mandates of the original purchase agreement, disclosure and how that information is publicly filed.

SCO's Stowell said the ball is in BayStar's court with regard to the next step.

"Even though we received this letter, unless BayStar can prove we violated or breached the terms of the Exchange Agreement, our company is not under obligation to redeem those shares," Stowell said.

BayStar confirmed last month after a rogue e-mail surfaced from a consultant, that it was referred to SCO by Microsoft, giving weight to the theories floating in the open source community that Microsoft was somehow involved in SCO's legal tussle with IBM and the Linux and open source communities. BayStar added that Microsoft did not invest any money in SCO.

SCO stock tumbled 13% on Friday, down $1.29 to $8.37 a share.


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