Thomas Motors, Part 3
It was the kind of thing that defied common sense.
And that was exactly why no one had suspected it until now.
The three of them all reacted as though it were absurd, but David seemed to have remembered something and spoke up.
“Come to think of it, in the interview Brad Button always said the T1 FCV was in motion, never that it was powertrain driven. I kept wondering about that part...”
If the truck had simply rolled downhill, then avoiding the word “driven” made perfect sense.
If anyone ever caught him, he could always claim he had only shown the video and never said the vehicle had been driven under its own power.
Edward raised a doubt.
“Even so, does it really make sense for that huge truck to have run on gravity?”
I nodded.
“They didn’t even film the start. They only showed it already moving, right? If you look closely, the road seems to slope a little. If they left it in neutral at the far end of the road, which wasn’t shown in the video, wouldn’t it just coast all the way down?”
“Not at that speed,” Edward said. “That’s too fast.”
“Then what’s your theory?”
“They must have installed a separate power unit.”
The other two seemed to agree with that.
Edward pressed the point harder.
“Thomas Motors is a company under intense public scrutiny. If that were the case, automotive sector analysts and industry experts would never have missed it.”
Honestly, I thought the same thing.
What on earth were all those so-called experts doing if they hadn’t noticed this?
Still, I wasn’t an expert in that field either, and words alone weren’t enough to persuade them.
The surest way to find out whether it was real or not was...
“Go test it.”
“Excuse me?”
I looked at Edward.
“Instead of standing around here, find out where the video was shot, drive there, and try it yourself. Put it in neutral and see whether it can really roll like that. Wouldn’t that settle it?”
“Well, yes, but...”
I also spoke to the other employees.
“Gabriella, go to Mississippi and check out the hydrogen truck factory. Morris, get back in touch with your friend who works at Thomas Motors. If you can meet any other employees, meet them too, and collect every scrap of information you can, no matter how small it seems.”
The three of them nodded.
“Understood.”
After the employees left to get to work, David turned to me.
“What are you planning to do?”
“Isn’t this a good opportunity?”
At my words, he let out a bitter smile.
“Stock predictions are one of two things: it goes up, or it goes down. But even if you know the direction, that doesn’t necessarily mean you’ll make money.”
The reason was timing.
Which was easier to profit from: a stock going up, or a stock going down? Obviously the former.
Plenty of people made money by buying. Far fewer made money by shorting.
Buying a stock meant putting time on your side. You could adjust your entry and exit whenever you wanted, and if it fell, you could simply wait for it to rise again.
Shorting, on the other hand, required you to get not only the direction right, but the timing as well. On top of that, the trading costs kept snowballing the longer you held the position.
That was why the former was called a long position and the latter a short position.
Even if you knew something would fall someday, it was useless if you missed the timing.
During the 2008 financial crisis, investors who predicted it and took short positions made enormous fortunes, becoming stars of the financial world.
But anyone who had taken a short position before then had been ruined.
Even Michael Burry, the man from The Big Short, would have gone bankrupt if the financial crisis had been delayed by just one more year.
But there was one way to make the timing perfectly clear.
“What if we’re the ones who blow this up?”
Nothing was surer than creating the moment yourself.
That was why short sellers took their positions first, then released reports warning that a company was in danger, doing everything they could to push the stock down.
Shark Management had used the exact same method.
In fact, Shark Management was one of Thomas Motors’ major investors, currently holding 3.9 percent of the company’s shares.
Apparently Michael Preston had already been looking at Thomas Motors with suspicion. Then he saw David’s report, became convinced, took a short position and loaded up on derivatives, and then used every ounce of his influence to set the whole thing off in the media and on Wall Street.
The report turned out to be true, and the stock, which had once climbed to 65 dollars, crashed to 12. More than 30 billion dollars in market capitalization vanished into thin air.
And David pulled off a huge success, earning five times his investment.
“It’s not as easy as it sounds.”
Unlike Korean securities firms, which churned out little but glowing praise, American firms didn’t hesitate to issue sell reports.
So if a sell report came out, did the stock automatically plunge?
Not necessarily.
“Madoff’s fraud was exposed in 2008. Do you know when the first suspicions were raised?”
“When was that?”
“1999. An analyst noticed something strange and reported it to the SEC. But no one paid attention. A few years later, other people filed complaints, and the result was the same. It was only after the financial crisis that they finally investigated, and the fraud came to light.”
It had taken nearly ten years from the first accusation of fraud to the truth being uncovered.
“On Wall Street, countless reports are published every single day. A lot of them point out problems, but not all of them are right, and most of them just disappear into the noise.”
I nodded.
“Yeah. While I was at DA Securities, I think I saw hundreds of reports every year saying Tisla would collapse.”
And yet it never collapsed. It just kept roaring ahead.
The investors who sold their holdings or shorted the stock because they believed those reports took massive losses.
David looked puzzled.
“Every year? I thought you only worked six months and quit.”
“Well...”
That had been true in the first life.
There were plenty of sell reports on Thomas Motors too, if you went looking for them. And yet they hadn’t had much effect on the stock price.
In truth, what mattered to investors wasn’t a company’s intrinsic value. It was the fact that the stock price was going up.
If the share price kept rising, what did it matter whether the company had problems or not?
Once momentum like that built up, it wasn’t easy to reverse.
Even when David released his report at Shark Management, the stock didn’t crash immediately.
There was no reaction for a while, until other hedge funds caught the scent, piled on sell reports, and unleashed a wave of short selling.
Only then did the stock fall 50 percent. And once the plunge became real, other institutions and individual investors joined in the selling, driving it down 80 percent.
It took about a month for the stock, once priced at 65 dollars, to sink to 12.
Unfortunately, Continue Capital didn’t have the same influence as Shark Management. And we didn’t have the luxury of waiting that long either.
If we wanted it to collapse fast, we had to hit it harder and more decisively.
Fortunately, there was a perfect event already scheduled.
“This week, there’s a Fuel Cell Day being held near Thomas Motors’ headquarters.”
Tisla, the leader in electric vehicles, had invented something called Battery Day. At the event, it unveiled its new technology and its vision for the future.
Apparently Thomas Motors had tried to benchmark that, because it had created its own version: Fuel Cell Day.
David nodded.
“At this event, they’re planning to announce a new vehicle along with a hydrogen infrastructure agreement with Hwaan Group.”
Following last year’s announcement of the T1 FCV, they were set to unveil the T2 FCV and join hands with Hwaan Energy and Hwaan Solutions to invest 1 billion dollars in building a nationwide hydrogen charging network across the United States.
In other words, Hwaan Energy and Hwaan Solutions would provide technology and capital for a business led by Thomas Motors.
Thanks to that expectation, Thomas Motors’ stock was hitting new highs day after day.
“What if the new vehicle turns out to be nothing but an empty shell, and Hwaan Energy pulls out of the memorandum of understanding?”
If a major partner abandoned the company’s most important investment plan, investors would start asking questions.
“Is that even possible?”
The investment plan and negotiations had already been finalized. At this event, they were only supposed to stamp the already-decided terms and announce them.
“For now, I need to meet someone at Hwaan Energy and try to persuade them.”
For the memorandum of understanding, Hwaan Energy had sent overseas investment team leader Heo Min-woong to the United States. He was none other than the second son of Chairman Heo Seonghun of Hwaan Group.
“You’re not planning to just show up out of nowhere, are you?”
That would only make them refuse to see me, wouldn’t it?
“Of course not. I’m going to ask someone I know to introduce me.”
“Who?”
Fortunately, there was someone I could ask.
“Just wait a moment.”
I called the number I had received some time ago.
At Yuseong Electronics’ Hwaseong campus, another meeting was being held for the semiconductor division executives. The older executives sat upright with their backs straight, their posture impeccable.
The agenda this time was the acquisition of ADM’s shares, as well as the purchase of the fabless startups RDQuanet and NP Semi.
In truth, Yuseong Electronics’ acquisition record hadn’t been very good up to this point. For that reason, mergers and acquisitions had been, for all practical purposes, on hold.
And yet now, out of nowhere, they were suddenly moving to acquire several companies at once.
What wind blew in to make him want to buy fabless companies?
The company he acquired before is already a millstone around our necks.
ADM is one thing, but what are the other two? I’ve never even heard of them.
Wouldn’t it be better to focus on foundry investment?
Everyone was skeptical in private, but no one voiced opposition out loud. The reason was simple: the man who had brought the proposal was Chairman Yoo Jae-ho himself.
Though only forty-seven, Chairman Yoo’s control over the group was absolute. In the public mind, Yoo Jae-ho and Yuseong were one and the same, and Yuseong was Yoo Jae-ho.
Even if you looked only at Yuseong Electronics alone, it was practically an empire in its own right. For that reason, each division president usually handled their own affairs independently.
It was extremely rare for Chairman Yoo Jae-ho to personally preside over meetings or issue direct instructions.
If things went well, the credit belonged to the chairman who gave the order. If they went poorly, the people in charge were the ones who had to bear the blame anyway.
It was more comfortable when he just left us alone.
No, seriously, what does the chairman know about M&A that he’s personally driving it?
The executives could guess the reason well enough.
It was because of the Dongwoo Precision acquisition.
Dongwoo Precision, which had been heading toward collapse, was revived thanks to Yuseong Electronics’ purchase.
Yuseong Electronics announced that it would invest additional development funds to normalize the company, and the moment trading restrictions were lifted, Dongwoo Precision shot straight to the daily upper limit.
Whether its NIL patents would actually lead to new technologies remained to be seen.
But if Yuseong Electronics hadn’t acquired Dongwoo Precision, the company would have fallen into Chinese hands, and that would have become a major burden in the future.
Simply by removing a future threat, the acquisition of Dongwoo Precision could already be called a success.
The executives could feel, down to their bones, that the group’s strategy had changed.
At any rate, since the chairman himself had ordered the acquisition, there was no room for opposition.
So the meeting focused mainly on how the acquisitions would be structured, how much they would cost, and how they could create synergy afterward.