The Panama Canal Company
By October the storms had all blown themselves out. Waldemar decided to take the fortune he had made over the summer and autumn and put it toward expanding the business once more.
In the end, shipping is the flower of industry in this age.
Ships that carried goods were an indispensable element of any vast economic empire. Simply buying vessels with cash, however, struck him as a waste. Why pay a fortune to someone else's shipyard when he could place the orders with a yard of his own?
Waldemar looked into several shipyards that might be worth acquiring. The one that caught his eye was Germaniawerft in Kiel — a fine company, with the technical capacity to build both iron-hulled steam merchantmen and warships.
"The ownership structure is also favorable for an acquisition."
John Connor explained that they could secure control through the Berlin-Hamburg Bank by purchasing existing shareholders' stakes and participating in a capital increase.
"And buying the controlling interest outright?"
"That's possible as well, but the premium would be extremely expensive."
"Then we'll take the long way around."
After instructing Connor to proceed with the Germaniawerft acquisition, Waldemar decided to place a few orders at other yards in the meantime. He could not simply sit and wait for the purchase to close. Time wasted was time he could not afford.
The vessels he ordered from the German shipbuilding industry were cargo ships of five thousand tons and above. These freighters, however, came with a special requirement. They needed sufficient internal volume — GRT, or Gross Register Tonnage.
Cargo ships of the five-thousand-ton class in this era typically measured between two thousand and thirty-five hundred GRT. Waldemar demanded, if at all possible, freighters with an internal volume of thirty-five hundred GRT or more. The greater the GRT, the greater the carrying capacity — and that translated directly into profit.
The naval architects generally looked uncomfortable at the request.
"That's... rather ambitious."
"Is it?"
Waldemar added a condition.
"Make the hull longer."
This was the most common method of increasing GRT by late-nineteenth-century standards. In the original timeline as well, the great ocean-going freighters of Britain and Germany had shown a tendency to stretch from the eighty-to-ninety-meter class into the hundred-to-hundred-and-twenty-meter class.
"Lengthen the hull?"
The designers said they would prepare the plans, but not to get his hopes up.
Once they actually start building, they'll all end up doing it that way anyway.
Having finished his merchant-ship orders, Waldemar also hurried to establish a shipping company. A shipping line needed experienced seamen, so he recruited a seasoned shipping executive from Hamburg.
"In the long run, our company must become the ladder connecting Africa and Germany, Europe and the New World."
"And the cargo? Is it ready?"
"Of course. More than we can carry."
Raw materials from the Congo, rubber from Brazil, German pharmaceuticals, automobiles, and electrical goods, American oil and steel. If they wanted cargo to haul, there would never be a shortage of goods. If anything, they would run short of ships.
Waldemar told the shipping company to secure capable navigators, merchant officers, and engine-room crews as quickly as possible. The deadline was one year.
Shipbuilding, shipping — these are businesses that need time just to take their first steps.
They would also require astronomical investment in the meantime. Money, of course, was not a concern. If he needed it, he could pull it in through futures, short selling, and equities.
The thought of money sent Waldemar leafing through newspapers from every country, hunting for a new target.
That's right. It's about time we harvested the French.
The French government's short-selling ban, imposed after the Paris market collapse, had been lifted more than a year ago. The reason was simple. The ban had been a temporary measure to contain a catastrophic crash. In fact, in the original timeline France had never banned short selling at all.
The French, however, had not liberalized everything. They stipulated that all trades must go through a broker, and they imposed constraints on settlement capacity. Naked short selling of the old, barbaric variety was no longer possible. But for Waldemar, the mere ability to short was enough.
If I can't have as much fun as I did with naked shorts, I'll just increase the capital and maximize the returns.
Waldemar was not short of money.
All right, then. Let's see.
He scanned the list of French companies that John Connor had researched and settled on the Universal Panama Canal Company.
It's going to go bankrupt anyway, but I don't feel like dragging this out.
Letting it linger would only bring down the corrupt French bureaucrats and politicians who had so eagerly taken the company's bribes.
In the long run those fellows are as good as my allies. If I don't protect them, who will?
Waldemar began preparing the short against the Panama company. To that end he sent people to Panama to gather accurate information on the actual state of construction, while also making contact with the yellow press so that they could flood the streets with scandal sheets at the decisive moment.
"If this one succeeds, the returns will be quite handsome."
John Connor agreed. Their target, the Panama company, was a considerable beast. The par value per share was five hundred francs, and six hundred thousand shares had been issued. In theory the company's market capitalization reached three hundred million francs.
The company's performance, however, was poor, and the shares traded on the exchange at a mere three hundred and fifty francs — so actual returns would fall short of the theoretical maximum. The volume, too, made it impossible to sweep up the theoretical ceiling of six hundred thousand shares. John Connor estimated that fifty thousand shares was a stable target, with a hundred thousand as the upper limit.
Even so, the expected profit was enormous. Assuming the company went bankrupt, and after deducting costs, they stood to make roughly thirty-five million francs. That came to about twenty-eight million marks.
A bit cheap compared to what we pulled in on futures over the summer and autumn.
Then again, a war scare was a special event. Comparing the two was a little unfair.
Waldemar, John Connor, and their people set the plan in motion at once. A swarm of agents descended on Paris and opened bank accounts. They were promptly introduced, through the banks, to official brokers.
"This gentleman is Mr. Montgomery, visiting from England."
"Ah. The gentleman who deposited two hundred thousand francs."
The French suspected nothing. A man's identity could be a lie. Money could not. Having verified their credit and collateral, the French brokers began intermediating the trades.
"And how may I be of service?"
"Panama. We'll be trading Panama company shares."
"Panama? That's a large company. The share price is quite stable. You'd have a hard time expecting a decline."
"We have ears. We hear things."
They entered into forward contracts to sell a number of Panama company shares for delivery on the next settlement date. As these transactions piled up one after another in Paris, a curious rumor began circulating through the financial district.
"The English and the Americans have suddenly flooded in, trying to short Panama company stock? Why?"
"Who knows."
"Judging by the scale, they seem pretty sure of themselves."
People felt a faint unease.
Not long after, a vicious rumor spread through the French yellow press.
The yellow papers shrieked that two hundred thousand people had already died in Panama.
"What? Two hundred thousand? How is a construction project that kills two hundred thousand workers even sustainable?"
People tried to find out whether it was true. The Panama Canal Company jumped up in protest.
"Two hundred thousand? If that many people had died, do you think we'd still be in this much trouble?"
The actual death toll was closer to fifteen thousand. Of course, that figure was plenty serious in its own right.
Before the Panama Canal Company could even discuss a response, terrifying photographs appeared in the yellow press.
They showed sheer, towering mountains and undeveloped jungle, and construction sections that had come to a dead halt before them.
"Wh-what? There are photographs?"
It did not take long for the Panama Canal Company's share price to plunge.
People hurled Panama Canal Company shares as if they had gone mad. The price crashed overnight from three hundred and fifty francs to two hundred.
And the problem did not stop there. As the share price fell and confidence in the company's viability wavered, investors and banks refused any further financing.
"What are we supposed to believe in, to lend you more money?"
The Panama Canal Company, already running at a loss, had no choice but to halt construction once the outside capital dried up.
When this fact appeared in the yellow press as well, the Panama company could hold on no longer.
"It's bankrupt. My money! I poured everything I had into this!"
"I believed in you! I put my entire savings into this because I trusted you!"
Enraged Frenchmen stormed the company offices and smashed the furniture, but it changed nothing.
"We... we can't save the Panama company, can we?"
A few politicians and bureaucrats with ties to the company did consider a rescue.
"Look at how this is going. You want to stick your hand in that? If you want to go to the guillotine, go alone."
The French politicians and bureaucrats cut the Panama company loose without delay. They had taken a few years fewer in bribes than in the original timeline, which made the decision to cut bait relatively easy.
The Panama company screamed and collapsed less than three months after the scandal broke.
"Right, then. We'll be executing our contracts."
The hyenas who had been waiting for this moment immediately presented the cheaply scooped-up shares and settled their forward contracts. The profits they harvested exceeded all imagination.
"Twenty-seven million, five hundred and forty thousand marks. A bit less than expected, but not bad."
Waldemar's people quickly closed the accounts and withdrew from France.
Waldemar had no intention of declining a French invitation the next time a table was set. In the space they left behind, only the fury and despair of the French remained.
Still, if there was any consolation, it was that this ending was better than the original timeline.