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Can Z-Score Predict SCOX Bankruptcy? | 9 comments (9 topical, 0 editorial, 5 hidden)
Re: Can Z-Score Predict SCOX Bankruptcy? (none / 2) (#2)
by nealywilly on Sat Mar 11th, 2006 at 18:36:21 EST
(User Info)
The Z-score is legit.  I followed Altman's work to develop a major US insurance company's predictive default model almost 20 years ago and it was very successfull for them.  At the time our's was more robust and predictive than quoted for Altman's model, but his work founded and predated mine by 20 years.  My former employer still uses an updated version of it today (and they also still use the name I coined for it based on an article I recently read).  Altman used multiple discrimant analysis and I did the same using SAS (then SPSS).  

Anyway, SCO's clearly headed to bankruptcy, despite what it's Z-score says.  Just a note that I'm sure will push SCO into the walking dead score range is that retained earnings are the cummulative earnings since inception/formation, so using stockholder's equity grossly overstates their case (i.e., makes them look more favorable) because you've included all the equity investments they received (not just the $50MM PIPE and recent $10MM infusion, but original IPO proceeds).

The retained earnings you should use for SCO is -$234,942,000.  Yes that's a huge negative number.  You only get it in the SEC filings, it's not broken out in the earnings releases.  BTW, The 1st Quarter 10Q needs to be filed Wednesday (3/15) to be on time.  

FYI - I'm a career corporate finance/investment guy that has no financial interest in SCOX or any other parties to their litigation unless they're in my broad-based mutual investments.  Same applies to the past and the future for SCOX.  

  • Re: Can Z-Score Predict SCOX Bankruptcy? by JCausey, 03/13/2006 20:20:53 EST (none / 1)

Can Z-Score Predict SCOX Bankruptcy? | 9 comments (9 topical, 0 editorial, 5 hidden)
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