Discontent with SCO spreads to backers

The largest investor in The SCO Group, Royal Bank of Canada (RBC), has sold most of its shares to SCO's second biggest investor, BayStar Capital.

Last Autumn, RBC invested $30m (£16.9m) and BayStar invested $20m (£11.m) in SCO, which is locked in a legal battle with IBM over the ownership of the intellectual property behind Linux.

RBC has now sold 20,000 of its shares to BayStar, purchased at $1,000 each, for an undisclosed price. The remaining 10,000 have been converted into common stock using a conversion price of $13.50 per share, giving it 740,740 shares.

Chris Pepper, a spokesman for RBC Financial Group, told vnunet.com that the move was a "business decision", but that the common stock investment meant that RBC was keeping its options open "to see what is best".

BayStar, which is now SCO's biggest investor, called last month for changes at SCO, maintaining that the company should rein in on spending and focus more on the legal battle. It has threatened to pull out of its investment.

BayStar did not respond to requests for comment from vnunet.com.

Since then SCO has appointed a new chief financial officer, Bert Young.

Blake Stowell, director of public relations at SCO, said: "At this point, the company's board has not given any indication that it has any intentions of making any management changes."

The company also laid off "less than 10 per cent" of its 275 workforce a few weeks ago. Stowell said that the redundancies came from sales, marketing, administration, professional services and engineering.

"This move by RBC does not change the $50m cash funding that SCO received as a result of the RBC and BayStar investments from last October," said Stowell.

But Gary Barnett, principal analyst at Ovum, stated: "It does not bode well for SCO's lawsuit. If RBC thought SCO would win - so that shares would double in value - it wouldn't be seeking to back out, would it?"

See also:

Judge rules on SCO/Novell motion to dismiss

SCO told to specify damages or case will be thrown out  11 Jun 2004

SCO Linux licence sales dry up

But company claims it can fight on in court for 'years to come'  10 Jun 2004

Weakened SCO vows to fight on

Group remains confident of seeing lawsuits through to fruition  09 Jun 2004

Don't fear SCO lawsuits, UK firms advised

Companies urged to sit tight over Linux licences  11 Mar 2004

SCO picks DaimlerChrysler for second suit

UPDATED: SCO explains why car firms were singled out  04 Mar 2004

SCO vs IBM

The $3bn lawsuit brought by the SCO Group against IBM will have repercussions for all IT vendors, as well as their users.  01 Jul 2003

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