Yes, SCO filed for chapter 11 protection from its creditors today.
I guess I find it odd, as they did not appear to be in debt. Call me naive, but, in order to get Chapter 11 protection, mustn’t you already be in debt and unable to pay your creditors?
From our friends at Yahoo:
Revenue (ttm): 26.80M
Total Cash (mrq): 7.79M
Total Cash Per Share (mrq): 0.363
Total Debt (mrq): 0
That is, SCO has no debt on its balance sheet. Oh, that is, unless they came around to Novell’s position.
I believe the long knives have come out. I will make a (not so bold) prediction. By this time next year, there will be no independent entity known as SCO which is even remotely related to the current entity SCO. The bold prediction is that SCO will cease to be soon.
I am not a lawyer, I don’t play one on TV. I can’t give legal advice.
I wonder (aloud) if Novell’s lawyers wouldn’t try to force them into Chapter 7. Liquidate the company, and return the money that SCO is squandering fighting paying to its rightful owners.
This is part of why Novell had wanted a trust set up for SCO’s assets, so that SCO wouldn’t whittle down the assets to zero while Novell tries to take possession.
All of SCO’s assets are at risk here. Novell probably sent them a letter demanding payment in full. And SCO, given the court’s ruling, has little choice but to pay. Hence they want protection from paying their debts, which they legitimately owe, after suing and whittling down large war chests given to them by fellow anti-linux travelers.
Something stinks like collusion here.
It would not surprise me to see Novell do a smash on them: petition for forcing Chapter 7, file some fraud claims and pierce the corporate veil, and go after the management and directors.
The investors who saw a too-good-to-be-true opportunity, invested, and lost it all might also file a petition to force Chapter 7. They were convinced by SCO management to part with money based upon a theory which has been found to be false in a court of law.
For all intents and purposes, SCO’s suits are over. Going to court doesn’t matter much when it is trying to stay afloat (with other peoples money).
They screwed over Novell, and I expect Novell to extract its $7M (remaining) of flesh. They screwed over their investors. That was a very, very stupid thing to do. SOX shows no mercy.
As I said, the long knives are out. They are not long for this world.
Update: It appears others are starting to notice the lack of debt and this little matter of conversion. PJ at Groklaw summed it us thusly
Keep in mind that Novell has already gotten a ruling from the Utah court that SCO is liable for conversion back on August 10. That money, whatever the amount eventually proves to be, is not a debt, I don’t reckon. It’s Novell’s money. It always was. SCO didn’t pay it, but it was never SCO’s money, according to my understanding of the ruling. Let me give you an example just to illustrate. If I rob a bank, I can’t then run to bankruptcy court and file for protection so I can keep most of the money. That money was never mine, so I can’t offer to pay the bank back at 10 cents on the dollar. I have to pay over whatever I stole, 100% or to the limit of what I have left in real life. [ed. emphasis mine]
Um… yeah. That money, that SCO is spending so freely now, is not SCO’s money to spend. That they are going on a hiring spree of lawyers and accountants suggests they have no intention of returning the money they owe Novell.
PJ goes on in the same paragraph:
Of course, I guess I could hire four law firms and some accountants to make sure that’s how it works, and by the time we finish studying the law and filing blizzards of paperwork and the lawyers get paid before the decision is actually reached about whose money it is, why, rats. There’s no money for the bank. I haven’t got it any more. My lawyers do, but what can you do?
I am not a lawyer, nor am I giving legal advice. Strategic advice, free of charge, worth its price.
Novell, I would, rather strongly, suggest you try to force them into liquidation or at least get the court to put all their cash and assets into trust until the amounts owned can be worked out, specifically so you don’t let them compound their previous behavior, and deny you the money they owe you. Otherwise, if you do not, they are going to squander all your money fighting you. You will be paying their lawyers, in essence, to protect them from paying you what they owe you.
As PJ points out, this is not a debt per se. You never extended them credit. So Chapter 11 might not make sense, or even be correct (remember, I am not a lawyer, so ask a real one if this does make sense). And her analysis of the rapid scale redistribution of your money is right on.
At minimum, get the court to place a hold on them spending any money until such a time as to the amounts can be decided.