BayStar Capital and SCO have agreed to a deal under
which BayStar recoups some of its investment in SCO and the Unix
company has more freedom in running its business.
SCO will buy back all of BayStar's 40,000 preferred shares in
the company for $13m (£7m) in cash and roughly 2.1 million shares
of the company's common stock.
As a result of the transaction there will be no more preferred
SCO stock outstanding, giving SCO more freedom to make business
decisions, said SCO spokesman Blake Stowell.
The preferred shares offer special powers to stockholders, such
as the right to a seat on the SCO board and the power to block any
acquisition, legal settlement or even payment to SCO's lawyers,
Stowell said. However, the preferred shares are not tradable on the
stock exchange.
As part of the deal with BayStar, SCO has also agreed to focus
on protecting its intellectual property and de-emphasise its Unix
business.
BayStar acquired 20,000 preferred SCO shares when it invested
$20m in the company last year. In April, BayStar said it was
looking for a way out of its investment in SCO, but a month later
doubled its holdings in the company by buying 20,000 preferred
shares from the Royal Bank of Canada (RBC) for an undisclosed
sum.
Under the buyback agreement with SCO, BayStar can sell the
common stock but its daily selling may not exceed 10% of the
average trading volume of SCO shares on the Nasdaq over the
preceding five trading days.
The investment by BayStar and RBC has been seen as crucial in
allowing SCO to pursue its intellectual property battle. Stowell
said that after paying off BayStar, SCO still has enough cash to
continue litigating. Cornett estimated SCO has roughly $45m left in
cash to continue its legal battle.
Joris Evers writes for IDG News Service