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The company made $20mn on a $50mn investment in the Unix company back in October last year, along with the Royal Bank of Canada. BayStar says SCO - which claims ownership of the Unix operating system - is in breach of certain terms of the agreement and wants to cash in its 20,000 shares, in a letter sent last Thursday.

SCO says it has been given no detail as to how it has erred and believes it has so far acted in accordance with the agreement.

The terms in question stipulate SCO's account of the company's status are accurate - including its ownership of its intellectual property; that any of the company's activities which should by law be made public have been; that a full and accurate press release about the purchase was published; and that the company hasn't undergone any adverse development in its business since the October agreement to buy the Series A Convertible Preferred stock and a 5 February conversion to Series A-1 Convertible Preferred stock.

Certainly between October and February there were significant developments between Novell and SCO that might be construed as having a negative impact and throwing into doubt SCO's ownership claims. The former registered Unix copyrights last year and numerous letters were sent between the two companies since June 2003. Yet research by paralegal Pamela Jones on the Groklaw site claims the letters were not made public in SCO's SEC filings. And in January of this year SCO filed suit against Novell for claiming it retained ownership of parts of Unix.

The BayStar investment has also been linked as a Microsoft referral in a leaked email from an external consultant to SCO last month.

SCO's stock closed at $8.37, down 13.35 per cent on Friday, when SCO announced the existence of the letter.