Fuel Cell Day (4)
Private investors agonized over whether to dump their shares, bleeding tears inside, and the American stock forum Army Ants erupted.
The fire spread to GM as well.
The memorandum of understanding for Thomas Motors’ stake acquisition had been a huge piece of good news for GM, too. Thanks to it, GM’s stock had climbed more than 10 percent.
But in an instant, it turned into a massive liability.
As shareholder inquiries poured in, GM CEO Jane Kaniter stepped in to explain.
“GM has not invested in Thomas Motors in any way. Nothing has been decided regarding an equity purchase or production. We do not intend to move forward with any investment plans until Thomas Motors’ technology has been verified.”
That statement triggered another crash in Thomas’s stock.
The price, which had barely been clinging to the $10 mark, plunged to $6 after GM’s denial.
As the controversy grew, the American financial authorities finally stepped in.
The SEC said it would conduct a careful investigation into whether Thomas had disclosed false information.
That belated response only sent private investors into a fresh rage.
News outlets all over the place ran stories about the Thomas Motors scandal, and foreign media picked it up as a major headline as well.
The first report and article on the subject had come from Trish O'Connor of the Wall Street Times. That left the other outlets with no choice but to cite her work.
Even as they wrote, the reporters were baffled.
“Was there even a paper called the Wall Street Times?”
“I searched it, and apparently it exists.”
“Who is this reporter, Trish O'Connor?”
“How did she break this report by herself?”
“Can’t we get an interview with Continue Capital?”
“They’ll probably give the exclusive to WST.”
“Can’t we reach Huaan Energy?”
“They’re saying they’ll only do an exclusive interview with WST, too.”
“Damn it! Not only did they get the scoop, they’re going to sweep up every follow-up story too.”
“Shouldn’t we at least interview the reporter?”
“Does anyone know somebody at WST?”
Because of this one incident, nobody in the business had heard of the Wall Street Times or Trish O'Connor.
That was only natural, given that an internet newspaper reporter had uncovered something that even Wall Street investment professionals and the mainstream media had missed.
For a journalist, it was the kind of scoop you might get only once in a lifetime.
The problem was the outlets that had already run praise-filled pieces on Thomas Motors. Those articles were now, all at once, fake news.
Once the backlash poured in, those news organizations apologized for the false reports and issued corrections.
Vanessa was no different.
Thousands of vicious comments flooded the article she had posted just before the event.
Vanessa Rose was popular enough to run the New York Times’ official YouTube channel. The public had loved her for years, so the backlash was just as fierce.
Reading the comments, Vanessa Rose bit lightly into her lower lip.
So I thought she was just trying to get attention, but it was all real!
If she had listened to Trish a little more carefully, she would have written the article with more caution. If she had, wouldn’t she have avoided this kind of ridicule?
How on earth did she figure it out?
She had joked that Trish might be sued, and now it looked like she might be the one getting sued instead.
Vanessa took a brutal dressing-down from her superior.
"You should have checked your facts before running that article! How could you publish something so wrong? Complaints are pouring into the company right now! There are people saying they’ll cancel their subscriptions, and people threatening to sue us!"
“I-I’m sorry.”
"Write an apology and publish a correction immediately!"
“……Yes.”
A correction was a humiliating thing for a reporter. It was practically admitting to the public that she had passed along false information.
But that wasn’t the end of it.
"Weren’t you friends with Trish O'Connor, the WST reporter who just broke this scoop? She applied to our company with you, too."
“Yes. Well, yes, but...”
"Good. Then call O'Connor for me."
“Pardon?”
"If you’re friends, you should have her contact information, shouldn’t you? Every media outlet is trying to get to that reporter right now. We need to reach her even one second faster than the others."
“What am I supposed to do after I call her?”
"What do you mean, what are you supposed to do? If you’re writing a correction, you need something to work with, don’t you? Bring back some material, get an interview, anything small will do. Now!"
“Ah, understood.”
Vanessa made a miserable face.
Until now, she had been quietly looking down on internet newsrooms, but now she was the one forced to beg for help.
Only if it had just been the report and the articles based on it would the shock have been this severe.
But at the event, the new model had been exposed as a mockup, and Huaan Energy, which had been expected to help build the hydrogen infrastructure, canceled its cooperation and dumped all of its shares.
When GM denied any involvement as well, Thomas Motors’ stock collapsed by a staggering 90 percent. In an instant, $36 billion in market cap evaporated.
The related companies fell in a chain reaction, sending shockwaves through the entire stock market.
The plunge showed no sign of easing. Investment firms that had put money directly into Thomas Motors, as well as those exposed to the related companies, were in full emergency mode.
“Where did you say that report came from?”
“A firm called Continue Capital.”
“And the author?”
“David Lockhart.”
“No way. That Lockhart? The one who worked at Victory Investment?”
“Wasn’t he kicked out of Wall Street?”
“Looks like he’s still alive.”
“Did he publish the report, buy puts, and then dump a mountain of short sales all at once?”
“Damn it. He must’ve made a killing.”
On Wall Street, there were countless hedge funds that hunted corporate accounting fraud or false disclosures, bet on the ensuing collapse, and then profited by exposing it.
But not all of them succeeded; some took heavy losses instead.
Continue Capital, however, had driven a stock down 90 percent in a single day with one report.
It was obvious they had made an enormous profit.
With the financial markets in turmoil, everyone wanted to know what Continue Capital really was.
The only known detail was that David Lockhart, formerly of Victory Investment, was the firm’s representative.
“When did they raise capital? And when did they even found the company?”
“Damn it! We should’ve brought him in ages ago!”
“Didn’t he send in an application to our company? Who the hell rejected it?”
David Lockhart had spent some time wandering from one job search to another after Victory Investment collapsed.
The investment firms regretted not having taken him in then.
Phone calls from investors came in from every direction, and operations were nearing paralysis.
Because the drop was so steep, it was hard to tell whether they should sell now or wait for a rebound.
Michael Preston, the head of Shark Management, frowned as he looked at the collapsing price.
Shark Management was one of Thomas Motors’ major investors. It held a 3.9 percent stake, worth about $1.6 billion.
And yet 90 percent of that value had disappeared in a single day. The shares that had been worth $1.6 billion that morning were now worth just $160 million.
More than $1.4 billion in fund assets had evaporated.
Fortunately, because they had invested relatively early, their loss rate had stayed at -35 percent rather than -90 percent.
Michael Preston read the report that had triggered all of this.
The man who had written that shoddy report was none other than David Lockhart.
And the person who had ripped the hood off the hydrogen truck at the event and exposed it as a mockup was an employee who had once worked under him.
That meant Lockhart had planned everything from the start to crush the stock. And the plan had worked perfectly.
How many people in the past few years had pulled off that kind of success on the short side?
In the middle of trying to clean up the mess, Michael’s phone rang. The caller was Erica Preston.
His younger sister.
He answered.
“What is it?”
"Your reputation for being invincible has been shattered."
“Losing money is only natural when you invest.”
"But you’ve never taken a loss before. That’s why you had that reputation in the first place."
“Being obsessed with your reputation is something only fools do.”
"There are more fools than smart people in this world. That’s why reputation always matters."
“What are you trying to say?”
"I heard David Lockhart applied to Shark Management. If we had brought him in sooner, couldn’t we have avoided this?"
Michael replied with his usual composure.
“There’s no point regretting the past.”
"That’s true. I only said it because I felt sorry about it. Anyway, I’m hanging up now."