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BayStar sets lawyers on SCO

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SCO's attempts to rescue its relationship with BayStar Capital, its biggest backer, have come to naught. On Friday morning, Eastern time, SCO announced that the stock buyback deal it agreed with the unhappy investment firm had closed. Two hours and five minutes later, Baystar issued a statement saying that a) no it hadn't and b) we'll see you in court, matey.

BayStar is the sole remaining major investor in SCO. Last year, it invested $20m in Series A stock, and then picked up another $20m worth of stock offloaded by the Royal Bank of Canada. In April, it told SCO it wanted its investment back because, it alleged, SCO had not kept to the terms of the investment agreement. The two companies agreed a stock buy back deal that would have seen SCO pay 2.1 million shares and $13m in cash to BayStar.

In Friday's announcement, SCO says it has kept its end of this bargain, and considers the matter closed.

Baystar responded with an announcement of its own. It says the deal is not resolved, and that it will file a suit seeking a declaratory judgment for its rights under the agreement. In the press notice, BayStar says that "until a final determination is made by the court, BayStar maintains its position as a Series A-1 Preferred stockholder of SCO".

According to SCO, at the root of the disagreement are BayStar's claims that there are inconsistencies between public and private statements made by the software company. BayStar wants SCO to provide documentary evidence to support its recent public claims about the SCOsource business.

SCO maintains that it has been a paragon of virtue and transparency throughout, and that everything it said publicly and privately is true. But, and this should come as no surprise, it won't had over the documents BayStar wants to see. It says this is to "protect the confidential and proprietary nature of the information" and to "avoid fostering speculation regardng its SCOsource business".

SCO's stock fell slightly on the news, ending the day at $4.20.

In May 2003, SCO filed a suit against IBM, alleging "misappropriation of trade secrets, unfair competition, breach of contract and tortious interference with SCO's business".

SCO then began approaching commercial Linux users, suggesting that they might be infringing on a little IP, and wouldn't they like to hand over those license fees now, please? SCO has to date refused to publish the code it says infringes its intellectual property.

Novell, RedHat and others in the open source community responded by offering to indemnify users against lawsuits from SCO, under the Open Source Assurance Programme. ®

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