The major speculator backing The SCO Group's legal jihad against Linux wants its money back. Marin County, California-based equity fund BayStar Capital invested $20m in SCO back in October, confident that the Utah firm had a strong legal case. Now Baystar says SCO has breached the agreement and wants to redeem its investment, which takes the form of 20,000 shares of SCO's Series A Convertible Preferred Stock. SCO doesn't agree, and wants to hang on to the cash. The terms were amended in February.
SCO says that BayStar alleges that SCO breached Sections 2(b)(v) 2(b)(viii) and 3(g) of the February agreement, but doesn't know more specifics. The sections detail obligations for "representations and warranties" and public disclosure. Shares in the Utah company fell 13 per cent today on the news. SCO admitted in October that the focus on its litigation had already damaged its traditional Unix on Intel business. SCO reported that at the end of the quarter ending 31 January, the company had $57.94m in cash and cash equivalents - down $6m from the previous quarter - and $6.67m in securities. Liability in the form of Series A stock was valued at $29.67m.
"Our funds have never taken part in toxic or death spiral convertible financings of any sort," BayStar's managing partner Lawrence Goldfarb wrote in a letter to the Financial Times last month. He wasn't talking about SCO, but critics will judge the metaphors to be appropriate. ®