Message ID: 131811
Posted By: al_petrofsky
Posted On: 2004-05-08 18:53:00
Subject: Letter to Lamlaw

Lamlaw's comments on bankruptcy on Wednesday are highly
recommended for those of you concerned about SCO's lawsuits
being left unresolved. The email below describes the only
exception I took to his explanation. (For those curious, I
shorted 100 shares of SCOX last August, and 11,900 more
between mid-February and last Monday. I absolutely do not
recommend any type of position in SCOX to inexperienced
investors, or, for that matter, to any investor whose
personal finances are unknown to me. Although I am licensed
as an NASD Registered Representative (CRD# 4169912), I do not
currently work in the industry.)

Date: Sat, 8 May 2004 15:30:25 -0700
From: Al Petrofsky <>
To: Lewis Mettler <>
Subject: SCO Bankruptcy trustee's minimal obligation to shareholders

Thanks for writing lamlaw. I appreciate having a lawyer's
perspective on SCO. I write because I think your
description of a bankruptcy trustee's role will give people
a false perception about the extent to which SCO's
bankruptcy trustee will be thinking about the interests of
SCO's shareholders.

(Background and disclosure: I have a 1995 B.S in Computer
Science from Berkeley, a 2000 Series 7 license from the
NASD, and a recently established 12,000 share short position
in SCOX.)

Once a bankruptcy trustee determines that a corporation's
liabilities clearly exceed its assets, then his job is to
maximize the number of pennies on the dollar that the
creditors receive, and he needn't give another thought to
the shareholders. When considering a particular lawsuit
settlement offer, he's not really weighing whether the
"shareholders and creditors will be better served" as you
say, but simply whether the creditors will be better served,
because the shareholders will get nothing either way.

Correct me if I'm wrong, but I thought that if *any*
creditor is forced to accept even one dime less than the
full amount he is owed, then the total amount distributed to
all shareholders will be zero. A creditor C might
voluntarily forgive a dollar of debt owed to it by bankrupt
corporation B if C figures that keeping B alive as a
customer will eventually generate more than a dollar of
income for C. However, I don't think any significant
creditors of SCO will be in that position.

If BayStar presses its redemption demand, then it could have
some sort of standing as both an owner and a creditor, but I
believe that IBM and Red Hat would be strictly ahead of
BayStar in the line of creditors (your confirmation or
debunkment of that would be appreciated).


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