SEC Investigating SCO? 281
Udo Schmitz writes "As Groklaw reports, the SCO Group stated in a SEC filing from yesterday: 'In addition, regulators or others in the Linux market and some foreign regulators have initiated or in the future may initiate legal actions against us, all of which may negatively impact our operations and future operating performance.' Does this mean the SEC finally started to pull some stops? SCOs and Canopys financial dealings (Vultus acquisition anyone?) long ago lead to speculations in the Linux community about the legality of their business practices, or the whole lawsuit just being a stock scam."
And the world wept (Score:5, Insightful)
It means nothing. (Score:3, Insightful)
It's the cost of raising capital through common stock.
Re:Good chance of it being a scam (Score:3, Insightful)
stock scams (Score:5, Insightful)
SCO just happened to have the balls (or the incredibly stupid idea) to sue the 2nd largest software company in the world for an astronomical figure.
Consider this perspective. Even if IBM had rolled over and paid SCO some big number in a settlement, that wouldn't impact the company's value nearly as much as the potential of winning the huge case. So basically, the threat of the huge payoff, magnified by stock market gambling, would (and did) push the stock price up far more.
Everyone with inside information then cashes out (inside meaning executives, primary funding investors, and Martha Stewart-type friends) while the stupid general "investing" public buys more stock after reading the daily press releases.
Re:Good chance of it being a scam (Score:5, Insightful)
"extending the life of a failing company for another few years so that shareholders have time to sell..."
Don't shareholders sell their shares to other shareholders by definition?
It's not like they are selling them back to Canopy Group.
Someone (a shareholder) is going to get hurt eventually.
Hence SCAM.
Standard CYA (Score:5, Insightful)
This CYA language is meant to prevent both SEC probing and shareholder lawsuits should something go wrong. This language is often copied verbatim in later filings, so it often is written to be as broad as possible.
Mere inclusion of such language does not mean that these factors have happened or will happen, only that the company thinks there is some non-zero chance of it happening.
Not surprisingly, SCO's language is pretty mushy here, but the wording, "have initiated or in the future may initiate" makes me believe that they're simply being prudent.
Of course, the fact that they feel the need to mention regulator investigation says a great deal about the company, regardless.
Re:And the world wept (Score:5, Insightful)
No SEC investigation (Score:4, Insightful)
I parse this to mean the statement is true if one or more of the conditions are true now or in the future. We know that 'others in the Linux market' are already suing (RHAT, NOVL). However, the statement as it stands doesn't say that SCO are being prosecuted NOW by regulators, but they may in future be prosecuted by regulators.
Therefore, I think the statement refers to the fact they are currently being sued by RHAT and NOVL, and might be prosecuted later by regulators (although this is not yet certain).
Bogus (Score:5, Insightful)
It used to be that the two were related, profit divided as dividends was the the primary motivation for determining share price - or the potential to control the company via the votes accrued. Now that it's all speculative - stockholders have hijacked the original purpose of the corporation which was a *business* to make money. This has led to SCO, HP, Nortel, Time Warner/AOL etc where short term decisions to help the stock price have resulted in long term harm to the corporation's viability and profitability.
I'm not saying that this is wrong either - but it really isn't very good for the economy overall when otherwise productive businesses are gutted to be made more appealing to the sucker buyer. The worst excesses (SCO, ENRON) should probably be punished. But there's not much that can be done about it as long as there are fools that want to get in on the sinking ship...
Re:Good chance of it being a scam (Score:5, Insightful)
The corporation's responsibility is working in the best interest of their shareholders - everything short of breaking the law in order to turn a profit for those who own stock. If that means suing a company just to stay relevant, so be it.
Are you actually embracing the moraless practice that corporations have these days? I understand the motivation to do this. I also understand the motivation of bank robbers to rob banks. "I as a bank robber have a responsibility to give my family the best living conditions and education possible. I swear I'm only looking out for my family!"
Yes I understand that's "how public corporations work", but that doesn't make it OK. Why is that in any way a defense? Enron has done much the same thing, and I don't hear too many people trying to defend them on a "corps do what corps do" basis.
Re:Good chance of it being a scam (Score:3, Insightful)
To be honest, I think shareholders would have been better served by the closure of the company and selling of its assets. I don't know who bought into SCO after the lawsuits, but they no doubt are receiving an expensive education. Keeping the company doors open a few more years doesn't always make business sense, and I think this certainly is the case with SCO.
Re:Good chance of it being a scam (Score:3, Insightful)
You just summed up (Score:3, Insightful)
The problem with that is not "morality" (whatever that means for a business), but efficiency and effectiveness. Efficacy. Viability.
A company should exist to provide the best products it can to as many customers as it can. In the long run, that will provide the most return for shareholders. Be customer driven, not shareholder driven, and you will have both.
Trying to run the company to please the shareholders is like driving a car down the highway looking back in the rear view mirror. You may stay on the road, but be careful when passing, and those toll booths are really tough.
A business is only bound to stoop to whatever depths their bylaws and SEC filings say. When Google puts in their paperwork that they won't be evil (and they spell out what they mean), it allows them to make decisions based on morality and ethics as they define them. Prospective stock buyers are informed, and can't demand that Google be anything else.
Not that Google is the standard - I'm just using that as an example. It's possible to run a company within guidelines of good citizenship. Most executives would rather just take the money, it seems.
Ignorance of the law (Score:3, Insightful)
Sure, it's a fun place to dig up speculative dirt, but that's all it is: speculation, and anyone who reads an SEC filing without this basic understanding of what he's actually looking at is... the kind of person who posts stories like this to Slashdot.
Re:Bogus (Score:4, Insightful)
The internet has also allowed stockholders to be the same way. 20 years ago, it was almost impossible to be a "day trader" and check on your stocks all of the time (unless you were doing it for a living). You had the newspaper with its once-a-day prices, and that's it. People also tended to hang on to stocks for a long time.
But you are right about not being able to do anything about it, short of a re-education program for investors.
Re:Good chance of it being a scam (Score:3, Insightful)
Immoral, maybe (like the original poster said, for some definition of morality) - but definitely not illegal.
Welcome to Corporate America.
Re:Standard CYA (Score:3, Insightful)
That is true, but some of these factors are more far-fetched and amusing than others. My all time favourite was the bubble company NetJ.com. I could never describe NetJ as well as Michael Lewis did here [hackvan.com], but in summary, the documents NetJ filed with the SEC indicated that as a matter of policy, it had no business plan. However, the principal risk was not that no business would result in no profit; on the contrary, the main risk identified was competition.
Re:Good chance of it being a scam (Score:4, Insightful)
Hence SCAM.
If someone getting hurt eventually was the only criteria for a stock scam, companies could not do anything - by its very nature, someone will get hurt with the stock market, pretty much no matter what. Buy low, sell high. It's up to the individual investors or their financial group/investors to judge the merit of the companies and the relative worth of their stock. Caviat emptor and all that. People who bought Enron stock got scammed. People that bought $BIOTECH that had promise but never delivered and went under made a poor choice. But both parties got hurt financially.
As grandparent said, there's prolly nothing illegal about SCO suing IBM et al. They claim that a contract was violated, hire a very respectable lawyer, and attempted to protect what they believed was theirs. Various of their statements have been rediculous and inflamatory, but there's no law against being stupid or making poor judgement. There's also no law against well timed press releases - all big companies do it all the time.
What *could* be illegal is if the powers that be can show that they purjured themselves, that they violated SEC rules, or that they engaged in insider trading. All of which can be difficult to prove.
Re:You just summed up (Score:4, Insightful)
Close, but to really understand it, you would have to drive down the road staring at the part just in front of the car instead of ranging in and out to 100 meters or so up the road like you are supposed to. It's a really really good way to get in an accident, so I don't actually recommend that you try it. Nevertheless, I think it's a very accurate comparison to running a company that is shareholder-driven.
Re:You almost made it... (Score:3, Insightful)
This is an important point, but it seemed obvious to me that the original poster merely didn't consider the terms of the GPL to be an "encumberance" (which, so long as you don't want to try to add additional restrictions to the rights granted to people that you redistribute to, they aren't really). I didn't get that the poster was trying to assert the Linux was public domain.
It's just a matter of semantics, but there is a difference between being "protected" and being "encumbered"...
Re:About time (Score:2, Insightful)
Re:And the world wept (Score:3, Insightful)
The problem with cases like these are that they're too easy to bring up, and have damaging effects to the reputations of the accused with very little risk to the plaintiffs, regardless of the merit of the case. It also costs companies mega-dollars to defend against these kinds of groundless lawsuits with little no hope of cost recovery. That means that anyone with enough cash to pay lawyers to sling mud can cause damage to a firm's reputation, and is the reason that killing SCO will not kill the hydra.
Re:And the world wept (Score:3, Insightful)
If the system worked better, I'd agree. For instance, flipping a (fair) coin is impartial, but I'd certainly feel sympathy for any innocent person subjected to such a "court."
Re:And the world wept (Score:3, Insightful)
Impartiality means we send someone to prison for the rest of their natural life under the Three Strikes law for shoplifting $2.69 worth of batteries. (Believe it: http://www.facts1.com/ThreeStrikes/Stories/ [facts1.com])
I believe that answers your question; please let me know otherwise.
Re:About time (Score:3, Insightful)
If that was so, they would have bought out SCO long ago. It would have been far quicker, simpler and cheaper than the legal road they've actually taken.
IBM, however, are smart enough to realise that if they do that then a hundred more SCOs will try their hands at getting bought out in the same way, with great profit for the executives. Therefore IBM have decided to show the world exactly what happens to asshats like SCO, in the hope that others will be deterred from trying the same in future.
If the legal option was available, IBM probably really would ask the judge to stick Darl's head on a spike over Traitors' Gate. They want everyone in the world to know what happens to people who ask IBM for danegeld.