Apex Capital (2): The Fallout
[WSJ] Investors Who Refused Additional Funding, Excessive Leverage — Apex Fund Begins Liquidation of Prime Assets
"Huh, thought they'd hold out a bit longer. Guess they just dropped dead instead."
They'd cranked up the leverage nice and high, aiming to throw ashes all over someone else's banquet table. Apex Capital will be fading into the annals of history before long.
> There's a guy named Richard who led this short-selling attack. They caught a photo of him getting kicked out of the company. Want to see it?
"Did they really toss him out with a cardboard box full of his stuff, like in the movies?"
I opened the picture Athena showed me with some anticipation, but it wasn't all that dramatic. He just looked completely hollowed out, refusing reporters' interview requests as he bolted for his car.
"Guess movies get it a bit wrong."
> Well, that's the industry. He's got some money saved up, but if he's unlucky, even that might get taken. Could be out on the street before long.
"Isn't that just his own karma? Who told him to ram into an innocent company just minding its own business?"
I'm not the one who threw the first punch here. Strictly speaking, this is damn near suicide.
At the same time, in New York, USA.
Richard scrambled into the back seat of his car like he was fleeing from the reporters, roughly yanking off his tie as he caught his breath.
"Drive. Get out of Manhattan first."
He'd been riding high for years on countless short-selling operations, and he'd hired a driver for convenience, so he told the guy to get them out of there and picked up his phone.
"The customer you are trying to reach is currently unreachable…"
"The number you have dialed is not available. Please leave a message after the tone…"
"Those goddamn bastards! After all the commissions I've paid them, they won't even answer one phone call?"
He was about to hurl his smartphone in rage when his lawyer's name flashed on the screen. Richard grabbed the call like a drowning man clutching at straw.
"John! How bad is it? My personal accounts are safe, right?"
"Richard, I'm sorry, but it's a nightmare. The investors filed a class-action lawsuit to hold you personally responsible."
Richard felt like the sky was crashing down. John was an alumnus from the same university and a long-time associate.
"Those ungrateful pricks. What are they suing me for?"
His judgment had been wrong — that much was true. He'd left the company, albeit semi-forced, taking responsibility. But hearing about the lawsuit sent a chill down his spine. The clients he dealt with were the kind of people who could take specks of dust, roll them into snowballs, and casually destroy someone's life.
"They're blaming you for driving the fund into bankruptcy by recklessly leveraging without properly assessing Neo Gate's financial health. Your penthouse and personal accounts under your name will be frozen within the hour at the latest."
Hearing that, Richard felt like a nightmare was materializing into reality.
"This is insane… John, can't you do something? Just buy me a few hours."
"It's tough. You know who the clients are that gave you that money, don't you?"
With that, a perfunctory "hang in there" and the line went dead.
Thud.
His phone slipped from his limp hand.
> Boss. The personal assets of the manager who led the short-selling have all been frozen too.
"Can't have him just take the fall and that be the end of it."
> Looks like the clients are also aiming their knives at the fund executives and operational staff. It's going to get pretty noisy.
The other side had been choked out before they could even put up a proper fight. It's meaningless now, but I'd done some digging to understand what kind of players they were.
"Guess there's karma after all. I don't really feel sorry for them. Good riddance."
This was a company with serious baggage — they'd written negative reports on clinical trials for companies developing treatments for incurable diseases, shorted them, and driven perfectly viable businesses into bankruptcy before.
> Maybe that's why nobody's stepping up to help them. International communities are already digging up their past. Other funds and companies are ignoring them too, not wanting to get caught in the crossfire.
"Funny that people like that managed to write a decent report this time around."
> If they were going to short it, they could've waited until this quarter's financial statements came out. But they got greedy and died. Same karma, really.
"Speaking of which, Apex is the one that died, so why's their stock acting like this?"
Neo Gate was the one that got shorted. Apex was the one that crossed the river Styx on a margin call. But looking at today's action, the one getting obliterated just as badly as Apex is Empire Games — their competitor-ish.
"Neo Gate's earnings came in strong… maybe their own situation is shit so they're getting dragged down?"
> Wasn't intentional on our part, but the launch dates overlapped, and when you open the hood, the report cards are just too polar opposite…
Even looking at just the official data, the numbers are tearjerking.
"Are they just dumping at market price? This is basically bungee jumping without a rope."
EMPIRE GAMES STOCK: -26%
> Even without us doing anything, it seems like it'll die of natural causes soon.
Their public image was already terrible. From an investor's perspective, it's not exactly an attractive opportunity either.
"Well, they've still got people throwing money at them. They won't go under, right? Hanging on life support is still being alive, isn't it?"
I wonder if being alive that way even means anything, but it's still better than that short-selling fund that's already crossed over to the afterlife.
"Nothing's changed from a few days ago. Why's everyone clammed up again?"
The chairman of Empire Games had thought, just days ago, that they'd found a way out of the current crisis. But now, watching the market turmoil settle and the value of the company he'd spent his life building — 51% of which he controlled — turn into scraps of paper, his insides were twisting so much he couldn't sleep.
"It's highly likely a temporary dip, Chairman. Neo Gate's new release has painted us in a negative light, but our actual revenue is holding up well."
The executives could see he was beyond upset — practically about to keel over from high blood pressure. They desperately put on calm expressions, trying to paint the current crisis as nothing serious.
"Revenue is holding up well? We didn't even hit our expected first-week sales, and the reviews are terrible. And you're sitting there telling me it's fine?"
The chairman had agreed to this direction himself. He'd even praised it as a good plan. But now that the numbers weren't matching his expectations, he was putting everything on the employees.
"Chairman, the preparations for the additional systems and the new business model we discussed last time are complete."
The one who stepped up again was Director Choi, the head of Revolution.
"Already? As expected of you."
The chairman, who'd been picking at every word from the other executives and dressing them down, turned syrupy sweet for Director Choi — the man leading the division that brought in the most money.
"The core of this update is the Mythic Weapon Gacha Ticket. We'll lower the probability but set the pity pull at around 50 million won. That alone will more than cover the losses from the new release."
On a downward spiral, they'd released a sequel to recover — but revenue was even worse than expected. To break out of this grim situation, the solution they'd chosen again was to suck the marrow out of their existing whales' bones.
The update would shorten the game's already dwindling lifespan and trigger massive backlash from players, but armed with the numbers that would hit the next financial statement and baseless confidence in the next title they were brainstorming based on Hwarang, none of that mattered to them.
"Push the update as fast as possible. We need to defend the stock price by next week. Got it?!"
> Boss, a few executives from Empire Games have contacted Neo Gate.
"I have no intention of hiring anyone from that side…"
Looking at how they operate, they're fundamentally incompatible with us.
> Then I'll decline them.
"Yeah. Sinking ship getting cold, so they're trying to bail out early?"
They must not see any way out either. Looks like they're scrambling to escape a sinking vessel.
> It's not public yet, but Empire Games is preparing a major update soon.
For a live-service game, a major update is usually exciting news. But given who we're talking about, the chances of anything player-friendly going in are basically zero.
"I wonder what creative new business model they're cooking up this time."
> They're releasing a new Mythic Weapon. It's essentially guaranteed pity, but players will have to fork over about 50 million won straight. The hurdle isn't that high, so it's practically a forced purchase structure for top-tier users.
The moment I heard "Mythic Weapon," I knew they were setting up a "pull or quit" death-or-glory ultimatum.
"I can't even begin to fathom what they're thinking. Is the new game really doing that badly?"
> They only hit exactly half of their expected revenue. At this rate, recovering development costs will be a problem.
That's not pocket change they've sunk into it. If they're about to lose all of it, then their frantic cash-grabbing actually makes sense.
"But doing this — what about their own game's lifespan? There's gonna be another truck protest and chaos."
> They're probably planning to funnel existing players into the new game as much as possible and then go all-in on the project they're brainstorming next. They're basically thinking about closing up shop soon anyway, so why not go out with a bang?
"Let 'em do what they want. They'll beat their own drum and dance their own dance until they disappear."
Now that I've confirmed I can churn out AAA games whenever I want, I don't really care much about the other side anymore.
"How are Hwarang's metrics?"
> Player completion rate has hit the target. We're planning to release the DLC after a six-month interval.
"Six months is just right. Any longer and it'd feel off, wouldn't it?"
Six months would line up with when Hwarang's base game gets its first discount. If we drop the DLC at that timing, the effect should be maximized.
"And… we need to sell off some of the Neo Gate shares that Black Ridge is holding. Any over-the-counter deals come in?"
> A few institutions have requested block deals. Should I offload with a premium?
"Hand them over. We need to release them back into the market anyway, and if we dump them all at once, the retail investors will get crushed."
If I put them out with a reasonable premium, they'll sell themselves. The buyers will come sniffing around on their own.