American Dream
"I understand. So you want to know why I'm not taking ID Group public?" At Yoo Jae-won's question, Lewis Preston nodded vigorously. The gesture also carried the clear intent that if an IPO were ever on the table, JP Morgan would strongly position itself as the lead underwriter. Of course, the ever-calculating Yoo Jae-won saw straight through the old man's motives. Otherwise, the CEO of JP Morgan would have had no reason to fly all the way to Silicon Valley. Still, one question remained unanswered for him: why would a firm managing hundreds of billions of dollars send its top executive to court a startup like ID Group?
ID Investment had earned a reputation as an angel investor after pouring billions from its oil futures windfall into Silicon Valley, but compared to JP Morgan, the difference was night and day. JP Morgan's current assets stood at roughly one hundred billion dollars, placing it fourth among U.S. banks behind Citibank, Bank of America, and Chase Manhattan. Citibank led with two hundred ten billion, while Bank of America sat at one hundred ten billion. The gap between Chase Manhattan and JP Morgan, however, was a mere five billion. In the race for the top spot, the two institutions would later merge, leaping into second place almost overnight.
"That is correct. May I hear your answer?"
"Hmm. It's not difficult. Quite simple, in fact. But before I give it, I'd like you to answer a question of mine first. That should make everything clearer."
Lewis Preston tilted his head slightly. He had expected a straightforward reply, yet Yoo Jae-won had turned the tables, circling back instead. Still, the seasoned executive kept his thoughts hidden behind a composed expression.
"Since you've come all this way, I'm sure you've already calculated ID Group's potential market cap upon listing. What figure did you arrive at?"
Lewis Preston's face tightened with mild discomfort. The question itself was not hard. JP Morgan's analysts had conducted a thorough valuation of ID Group at the request of several major clients—and because Lewis himself had been curious. The result had been encouraging enough to bring him here in person. Yet repeating the number outright felt awkward. It was more than a figure; it was a demonstration of JP Morgan's analytical prowess. A proper briefing would be required to showcase that expertise and, by extension, argue why JP Morgan should lead the IPO. But a full presentation now seemed impossible. From the way Yoo Jae-won spoke, it was clear he already believed his own valuation diverged sharply from JP Morgan's. What Lewis wanted was the size of that gap—and the reasoning behind it. He had chartered a private jet at considerable expense; he could not leave without answers. Moreover, any insight gained here would prove useful when dealing with the countless other tech firms in Silicon Valley.
"Well, first, let me assure you that JP Morgan holds a more positive view of ID Group than any other investment bank."
The preamble was long, as usual. Yoo Jae-won felt his patience wearing thin. He preferred cutting straight to the point in business matters, and the plush hotel café chair suddenly felt irritatingly rough against his back. Just as he was about to demand the number outright, Lewis spoke again.
"Twelve billion dollars. If you proceed with the IPO through JP Morgan, we can guarantee a valuation of at least twelve billion dollars."
The answer had arrived. It was exactly what Yoo Jae-won had expected—far too low. He suppressed a derisive laugh. Twelve billion? For the entire ID Group? Not even ID Technology alone, but the whole conglomerate? ID Investment had deployed capital across numerous ventures, yet still held substantial cash reserves. Its portfolio included assets poised to become critical in the years ahead. ID Investment was also preparing to expand into Japan and intensify its U.S. activities. Beyond Silicon Valley, it planned aggressive moves into gaming, film, and music. Its oil futures trade had delivered unprecedented returns, and if that success continued, the stock price would skyrocket. For now, the market only saw a single successful bet and undervalued the firm accordingly. Still, twelve billion was absurdly low. In Korea, where Yoo Jae-won's name carried weight and investment banking fever ran high, ID Investment by itself would command twelve billion easily.
"My company currently consists of two main entities: Investment and Technology. How did you value each separately?" Yoo Jae-won pressed, wanting precise figures before debating the total.
"Investment at nine billion, Technology at three billion."
"Hmm."
Just as he had suspected. Hearing the split made the urbane Lewis Preston sound more like a highway robber. ID Technology at a mere three billion? That crossed the line from bargain into outright theft.
"Have you not heard that ID Technology acquired Microsoft for one billion two hundred fifty million dollars?"
"I am aware." Displeasure flickered across Lewis Preston's face. Though Yoo Jae-won's tone remained polite, the rebuke within it was unmistakable.
Wall Street, alongside the U.S. intelligence apparatus, was a nexus of global information. Stock trading was fundamentally a bet on future value—three months out, or several years. Consequently, the Street reacted most acutely to world events. Sometimes prices began collapsing on Wall Street while the news cycle remained calm, only for war to be announced minutes later. Naturally, the news that Yoo Jae-won had purchased Microsoft for one billion two hundred fifty million dollars had spread widely. His question implied that JP Morgan's valuation had failed to account for this acquisition. A year earlier, Microsoft's own market cap had hovered in the high six billions; the successor to that throne should, at minimum, command a comparable figure.
Lewis answered quickly. "We know Android 1.0 has become a global phenomenon. The product is solid, and the marketing aggressive. The issue is price. Even with volume sales, ten dollars is simply too low. Without competitors, such aggressive pricing was unnecessary. Naturally, projected earnings have fallen to roughly one-twelfth of Microsoft's peak."
JP Morgan's logic was straightforward. Microsoft had priced its final DOS 4.0 release at one hundred twenty dollars. Few paid full price, yet the product remained expensive. Android 1.0, by contrast, was free for individuals and only ten dollars for enterprises and government offices. Simple arithmetic suggested revenue would drop by a factor of ten, dragging profits and market cap down with it.
"A conservative estimate would place the value at only six hundred million. However, factoring in market expansion, the recurring revenue from the adware system, and ID Office's dominant market share, we arrived at three billion."
Lewis added that more conservative banks would have offered far less than twelve billion for the group as a whole; only JP Morgan's willingness to take bolder positions allowed for that figure. To Yoo Jae-won, the number remained laughably inadequate.
"What valuation does Chairman Jay have in mind?"
Yoo Jae-won hesitated. Revealing his true figure might give the elderly executive a heart attack. His number carried one extra zero: one hundred twenty billion dollars. At the current exchange rate of roughly seven hundred won to the dollar, that equated to about eighty-four trillion won—two hundred billion dollars more than JP Morgan's entire asset base. Lewis would never accept it. He would think Yoo Jae-won insane. Yet one hundred twenty billion did not feel excessive. At the height of the late-1990s IT bubble, Microsoft's market cap had exceeded six hundred billion. Another bubble was coming. When it arrived, would ID Group's stature be any less than Microsoft's had been? Absolutely not. The master plan was unfolding without deviation, and ID Group's influence would grow several times larger than Microsoft's ever was. Selling such a prime asset for twelve billion? In 1999, a mere ten percent stake in ID Group would have fetched at least sixty billion; now it was valued at only one billion two hundred million. It was the same waste as trading ten thousand Bitcoin for two pizzas—money thrown away. Even adjusting for inflation, the gap remained vast.
While an IPO might seem attractive for raising capital, the penalty was too severe for Yoo Jae-won. If he needed funds, issuing corporate bonds at rates comparable to bank loans would be far preferable.
"Hmm." His deliberation stretched on. Explaining such a massive discrepancy would be tantamount to revealing his entire future blueprint. If Lewis grasped even part of that vision, it could create significant variables—most dangerously, JP Morgan expanding its own tech investments. Should the two sides compete for the same technologies or companies, JP Morgan's enormous capital reserves would overwhelm even Yoo Jae-won. Even if Lewis himself failed to understand, the army of investment professionals under him might shift their strategy. Lewis had already hinted that others suspected Yoo Jae-won was thinking differently and had urged him to investigate. Those unknown figures were the true threat. Famous geniuses could be anticipated; hidden ones were variables themselves. A single spark of insight could push them beyond anything Yoo Jae-won had planned. Better, then, not to explain. The cost would simply be greater inconvenience. Already, banks constantly pressed him to accept their investments. The more successful ID Group became, the worse it would grow.
How much would be enough? Yoo Jae-won began calculating a figure high enough to satisfy their maximum expectations while deterring all but the most determined suitors—an exclusion line, of sorts. The math concluded quickly.
"Twelve billion should suffice."
Lewis Preston's face filled with confusion. Twelve billion? That was the number he himself had proposed. Surely the young man was not mocking him. Expecting more, Lewis remained silent and waited.
"Twelve billion for Android alone."
"Hrk!" Lewis Preston's reaction was immediate. At least the word "logical" had appeared; apparently he had not been dismissed as a madman.
"Twelve billion? For a single product line? Our models cannot possibly generate that figure. Please explain."
"I cannot go into great detail."
"That's fine."
Even if his explanation proved inadequate, Yoo Jae-won saw no problem.
"The greatest difference between JP Morgan and myself seems to be our understanding of the business model."
JP Morgan's three-billion valuation for ID Technology stemmed from treating Android's operating-system sales as the primary revenue source—the same mindset applied to traditional manufacturing firms that sell physical products and count the margin. Yoo Jae-won saw things differently. Android could be given away for free. The applications, libraries, and adware system bundled with it would generate enormous profits. And the final touch was the internet itself.