Scoops Are Always Welcome (2)
Just release the report first. You can put up the proper article before the event ends.
“The event?”
In three days, the PureCell Day event will be held in Alabama. I’ll send you a press invitation, so you can come, right?
She barely managed to swallow the cheer that rose in her throat.
“Really? Then I’ll look into plane tickets first.”
How much was left in my bank account again?
Flights and lodging are both covered by the organizers.
At that point, there was nothing left to think about.
“Yes, yes, of course! I’m going! I’ll leave right away!”
Trish O’Connor of the Wall Street Times published Continue Capital’s report and article on the website. Because it came from an obscure reporter at an online outlet, and because the report itself had been written by an equally obscure private-equity firm, almost no one paid it any attention at all.
We moved to a larger room. By then, the hotel suite had been transformed into something that looked more like a trading room, with several desktop computers and laptops lined up across the tables.
David said, half joking, “It’s a shame we don’t have a Bloomberg terminal.”
“It’s not something we need right now.”
After all, we were only going to trade one name.
The only question left was how to structure the investment.
If you expected a stock to rise, you bought shares or invested in call options. If you expected it to fall, you shorted it or bought put options.
Morris Pearson made calls all over the place, searching out Thomas Motors put options and buying what he could. He bought every put available, but the volume was not that large to begin with.
Thomas Motors was not a major name on the exchange, and since there was almost no real demand for the stock, the number of contracts issued was bound to be small.
We would buy as many puts as possible and short the rest.
With ordinary short-selling, there was no way to earn more than 100 percent. That did not mean there was no other method.
I brought it up casually. “What about CFD trading?”
David’s eyes widened. “Are you serious?”
CFD meant Contract for Difference.
Instead of buying or selling the stock directly, you posted only margin, and the financial institution handled the purchase or sale on your behalf, while the investor took the gain or loss from the trade. It was a new kind of derivative product.
Because you could place the order with only 10 percent margin, it was possible to generate ten times leverage. In that sense, it offered even greater leverage than most options.
The problem came if the stock moved in an unexpected direction.
If you shorted with ten times leverage and the price rose by just 10 percent, you would lose everything you had put in.
“Surely the person who wrote the report isn’t the one who’s unsure, is he?”
At that, he gave a wry smile. “I’m certain Thomas Motors is a weak company. I’m just not certain people will believe it.”
“Have confidence.”
David Lockhart was widely regarded as one of the finest investors of the next ten years.
Purely in terms of ability, he should have been working under me. No—strictly speaking, I wouldn’t even have had the chance to work under him.
He had been saddled with the disgrace of being a failed investor even after warning the company again and again, only to be ignored each time. And yet, with a single report, he would turn that reputation completely on its head.
This was that report.
I looked at David and the others and said, “Musicians want to play a little better. Athletes want to post a little better times.”
There was no grand reason for it.
It was simply what they did.
“In the same way, when an investment opportunity comes along, an investor has to squeeze out as much profit as possible. Do you think opportunities like this come around often?”
The truth was that plenty more would come later, but there was no reason to say that out loud.
“Even if we lose every cent of this money, it won’t matter. If we’re going to invest, then we do it properly. I want everyone on Wall Street to know exactly what Continue Capital is, and exactly who David Lockhart is.”
David looked at me.
“Are you certain?”
“Yes. I’m certain. So show everyone what this firm can really do.”
He nodded, as if he had finally made up his mind.
“Understood.”
Bang Soo-hwan, president of Hwaan Energy, was the very image of a salaryman myth: a man who had joined as an ordinary employee and climbed all the way to the top.
After Hwaan Energy was spun off from the holding company, he had led the firm with steady, stable management. In truth, his strength lay in maintaining what already existed; he was not the kind of man suited to trying something new. But there had never been much reason to worry about that. The push into new industries was being handled by Team Leader Heo Min-woong anyway.
Bang was, in a sense, a guardian figure. By the time he retired, Heo Min-woong would probably be stepping up into the president’s chair.
Since it was a fixed path, Bang had no complaints.
All he wanted was to retire and then, if he could land a president’s seat at some subcontractor afterward, keep drawing a paycheck in peace.
Heo Min-woong should be doing well, right?
He was currently in the United States for the memorandum of understanding with Thomas Motors. The deal would be packaged as his achievement and presented to the public.
The PR team had already written the press release. They planned to send it out to the media all at once after the agreement was signed.
Bang was waiting comfortably when Heo Min-woong’s call came through.
Bang Soo-hwan: “Are things going well in the U.S.?”
Heo Min-woong: “Sell all Thomas Motors stock right now.”
Bang Soo-hwan: “...Pardon?”
Hwaan Energy was a major shareholder, holding 4.3 percent of Thomas Motors’ stock.
They had already enjoyed a fifteenfold gain, and there was even talk of buying more for the sake of future cooperation.
What the hell does he mean, telling me to sell everything when I’m there to sign an agreement?
Bang asked, sounding thoroughly baffled, “What on earth are you talking about?”
“I already sent you the materials, so check them and call me back right away.”
He hung up and opened the email at once.
It was a report analyzing Thomas Motors.
It was written in English, but Bang Soo-hwan had spent so many years posted in the United States that he could read it without help from anyone else.
He went through the report carefully.
It said that Thomas Motors had no real technology at all—not for hydrogen production, not for transportation, and certainly not for building hydrogen trucks—and that everything they had ever announced had been smoke and mirrors.
Bang called Heo Min-woong back.
“You’re telling me to sell because of this report?”
Heo Min-woong: “Yes.”
Bang Soo-hwan: “There are reports like this all over the market, though, aren’t there?”
Heo Min-woong: “Everything in it is true.”
Bang Soo-hwan: “Wait. Then the part about them rolling the car down a hill...?”
Heo Min-woong: “Yes. I checked it myself.”
Bang Soo-hwan: “...”
Heo Min-woong: “I don’t care what those bastards at Thomas Motors have to say. It’s all lies. I tried to check out the new vehicle they’re unveiling at this event, but they wouldn’t even let me get near the car.”
Hwaan Energy’s main business, solar power, had been drowning in losses for years, and yet the stock price had kept climbing.
There were two reasons for that.
First, the value of the Thomas Motors stake it held kept rising. Second, investors were excited about the hydrogen infrastructure business.
But what if the public learned that Thomas, the partner in that hydrogen infrastructure project, was a fraud?
The stock would collapse.
Bang Soo-hwan felt the seriousness of the situation sink in.
Still, Heo Min-woong was one of the owner family. Even if something went wrong, he could always return to the group whenever he wanted.
But for a salaryman president, getting cut loose once meant the end.
“What should I do?”
Heo Min-woong: “Sell all the stock before the event starts. Not a single share left behind.”
Bang Soo-hwan: “What am I supposed to tell Hwaan Solution?”
Heo Min-woong: “Tell them too. Attach the public report and send an official notice saying it would be better to sell. Then let their vice president look at it and decide for himself, won’t he?”
Hwaan Solution’s vice president was the chairman’s eldest son.
He was the most likely candidate to become the next chairman.
If there really are verification materials, why isn’t he sending them? Is it fine not to explain the situation in full?
As Bang thought that, Heo Min-woong pressed him again.
Heo Min-woong: “Whose side are you on?”
Bang Soo-hwan: “What?”
Heo Min-woong: “Listen carefully. If this blows up as-is, both you and I are finished. It doesn’t matter whose side you were on before—right now, you’re coming with me.”
Bang was a company man too, and the one thing that mattered most to a company man was survival.
Heo Min-woong was right. If this went public and exploded, someone would have to take the blame. Who did that usually end up being?
The hydrogen energy business was a joint project between Hwaan Energy and Hwaan Solution.
They were both part of the same Hwaan Group, and because they were working together on the same hydrogen project, outsiders might see them as one and the same. But they were, in fact, separate companies.
Once the memorandum of understanding was broken, someone would have to bear responsibility. When trouble hit, the battle would immediately turn into a fight over who was at fault.
But if Hwaan Energy noticed the problem in time and escaped the loss, while Hwaan Solution got stuck holding the bag?
Bang Soo-hwan said, in a hardened voice, “Understood.”