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The SCO Group Inc., which has sued IBM for more than $3 billion and claims that Linux is an unauthorized derivative of Unix, on Thursday said it had received a $50 million cash boost in a private investment deal led by BayStar Capital, an investment fund.
BayStar, which is based in Larkspur, Calif., and has investments in other hardware and software companies including Neoware Inc., Roxio Inc., Commerce One Inc. and Neoware Inc., has structured its investment in SCO as a private placement of non-voting Series A Convertible Preferred Shares.
These shares are convertible into common equity at a fixed conversion price of $16.93 per share—the average closing bid price for the companys common stock for the five trading days prior to and including the date of closing.
Once converted, BayStar will own an aggregate of approximately 2.95 million shares of SCO common stock or 17.5 percent of the companys outstanding shares.
Add this $50 million investment to the cash on hand at the end of the quarter to July 31, and now SCO has a net cash position of some $61 million.
“This cash increase will significantly enhance the overall financial strength of SCO while providing substantial additional funding for business objectives including future Unix and SCOx Web Services software development, new strategic partnerships, and protection of the Companys Unix intellectual property and related programs,” said CEO Darl McBride in a statement released on Thursday after the financial markets had closed.
SCO had made “significant strides forward” in its on-going effort to protect and enforce the companys intellectual property rights through SCOsource, he said, adding that “we have also been steadily strengthening our core operating business, and in the coming weeks, we look forward to providing the industry and Wall Street with additional details on our plans and initiatives.
“Now, with a $50 million investment from BayStar, we believe we have secured the capital necessary to fund all aspects of the long term growth of this company,” he concluded.
For his part, Lawrence Goldfarb, the general partner for BayStar Capital, said in a statement that his firm invested in “growth-oriented firms with strong management, substantial market opportunity and solid, comprehensive business plans.
“We believe that all of those fundamentals are in place for SCO to succeed. It owns the most predominant Unix software assets in the IT industry, has a 20 year history of providing trusted software solutions to end users around the globe, and an aggressive and seasoned management team focused on generating profitable growth.”
SCO will hold a media teleconference on Friday to give further details of the investment. A spokesman could not immediately be reached for comment.
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