SCO claims to own key elements of the intellectual property used in the Unix operating system, and alleges that its code has ended up illegally in Linux distributions.
The company filed a lawsuit against IBM in 2003 in which it alleged that Big Blue illegally contributed SCO source code to Linux.
Friday's stock market beating came after a judge upheld a ruling made in June in which a Utah judge dismissed the vast majority of SCO's legal claims against IBM.
The judge stated that the software firm had failed to produce any evidence to back up its intellectual property ownership claims.
SCO countered that IBM already knew what code it had "stolen" and was therefore in a much better position to disclose the details.
Following the legal set-back, SCO's market capitalisation now stands at $26m. Shortly after launching its legal offensive, the company's stock peaked at nearly US$20, representing a market capitalisation of roughly US$400m.
The case has served as a cautionary tale of the intellectual property challenges faced by open source software.
Software vendors including IBM, Computer Associates and even Microsoft have made patent pledges in which they promise not to assert their intellectual property against open source developers and users under certain conditions.
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