SCO-duggery (code comparison)
Joseph S. Barrera III
joebar at polymathy.org
Wed Aug 20 17:24:33 PDT 2003
Luis Villa wrote:
> On Wed, 2003-08-20 at 18:43, Robert S. Thau wrote:
>>it's conceivable that someone may have
>>grounds to sue for negligence or fraud.
> If what we're seeing so far is correct, I'd hope it's more than
> lawsuits- the SEC apparently has the power to prosecute and jail
> executives responsible for these types of scams.
Especially if they subsequently dump their stock:
SCO execs cash in on suit spotlight
By Patrick Gray
July 29, 2003, 8:17 AM PT
Senior SCO Group executives have been dumping their personal holdings in the
company since June, U.S. Securities and Exchange Commission (SEC) filings have
Since SCO launched its legal action against IBM, claiming that Big Blue had
violated trade secret laws by sharing proprietary code with open source
projects, its share price has sky-rocketed.
The price rise has been enough to convince senior executives to dump their
personal shares in the company during the last two months. SCO's chief
financial officer, Robert Bench, has sold 14,000 shares in the company since June.
Bench isn't alone. The company's vice president of worldwide marketing, Jeff
Hunsaker, has sold nearly $230,000 of his stock, reducing the number of shares
he holds by 42 percent from 35,494 to 20,494 since early June.
Although the reduction may seem severe, Hunsaker, and several others, still
have plenty of stock options left; thanks to the grants they received three
weeks after the legal action against IBM began. Hunsaker was handed 100,000
options to buy the company's stock for $2.07. SCO shares are currently trading
The company's president and chief executive, Darl McBride, was given 200,000
of the $2.07 options. McBride had some other options up his sleeve, with an
SEC filing revealing he purchased over 7,000 shares for a meager $7.
Some commentators have suggested the company made the legal claims against IBM
in order to boost its share price so it could use the stock to acquire Vultus,
a web services company.
Vultus received seed money from a private equity management company, the
Canopy group, which is a personal investment fund founded by former Novell
boss Ray Noorda. Canopy was also a founding investor of Caldera Systems, which
later became the SCO Group. In fact, SCO and Vultus were even located in the
same building before the acquisition took place.
SCO stock has been flying around all over the place. SCO issued around 300,000
shares at par value $0.001 earlier this month, which was used to acquire
Vultus. The stock went to Vultus, Canopy, Vultus chief executive Michael
Meservy and others.
Meservy received over 27,000 of the SCO shares for $27. However in the grand
scheme of things, that's nothing. In a "Registration statement on form S-3"
filed with the SEC, the company reveals how many new shares it can issue
whenever it wants.
"We have an authorized capital of 45,000,000 shares of Common Stock, par value
$0.001 per share... Our board of directors has authority, without action or
vote of the shareholders, to issue all or part of the authorized but unissued
shares," the statement said. "Any such issuance will dilute the percentage
ownership of shareholders and may dilute the book value of our common stock".
Considering the company has only 13.5 million shares floating around, it is
conceivable that the issuance of 45 million shares at a tenth of a cent each
may dilute the list price somewhat. If that wasn't enough to make shareholders
twitch, the registration statement contains other information that throws some
light on SCO's position in regard to options.
"As of July 1, 2003, we have issued and outstanding options to purchase up to
4,011,975 shares of common stock with exercise prices ranging from $0.66 to
$59.00 per share. The existence of such rights to acquire Common Stock at
fixed prices may prove a hindrance to our future equity and debt financing and
the exercise of such rights will dilute the percentage ownership interest of
our stockholders and may dilute the value of their ownership," the statement said.
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