Reborn in America, I am a legendary short seller on Wall Street.

Chapter 148 Goodbye Mr. Koster

On Monday morning, March 7, Larry, as usual, arrived early in his carriage at Mr. Wallace's house.

It was still dark, and the spring chill was in the air. The horses pulling the carriage were snorting and constantly shuffling their front hooves in place.

Larry wasn't in a hurry. He handed the coachman a cigar, lit one for himself, and waited quietly in the carriage.

After a while, Mr. Wallace, dressed neatly, came out carrying a suitcase and wearing a top hat. Seeing the carriage waiting at the door, Mr. Wallace remarked, "Samuel is quite reliable today, he's actually waiting for me here so early."

But when he got closer, he found that it was Larry Livingston waiting for him.

Mr. Wallace frowned, pointed at Larry, and burst into laughter. "I knew it! I thought Samuel was finally getting reliable... but it was you, Larry."

Larry smiled and raised his hat. "It's my pleasure to serve you, sir!"

This is a scene from the first business trip the two of them took to Hartford. At this moment, Larry greets Mr. Wallace in the same way he did before. Mr. Wallace is also filled with emotion, because it has been less than three months since their first business trip together.

The two arrived at the train station. Larry paid the fare first, then picked up Mr. Wallace's suitcase and smiled, gesturing for Mr. Wallace to go ahead.

Everything was exactly the same as before he became rich; Larry still maintained his respect for Mr. Wallace.

Mr. Wallace understood more and more why Mr. Potter loved Larry so much back then. That young man was such a social butterfly!

The two boarded the first-class carriage. Larry put down his luggage and had already gone to the dining car to ask for a breakfast without seafood.

On his way back, Larry saw Mr. Dunbar and Matthew Browning at the other end of the first-class carriage and nodded to them.

This was Larry's special arrangement. Mr. Dunbar is now Larry's personal bodyguard, but because of Mr. Wallace's presence, he can't be allowed to get too close, so he just needs to follow from a distance. As for Matthew, he needs to return to Hartford to handle some personal asset matters.

Larry learned on Sunday afternoon that he needed to go to Hartford, so he specifically asked the two of them to come along.

Now that they've met in the train carriage, the three of them pretend not to know each other, only nodding to each other discreetly.

Once Larry was seated, Mr. Wallace remarked, "Larry, I had Samuel inform you yesterday so we could all attend the Colt Company's celebration together. Not only will Mr. Andrew personally present us with awards, but Mr. Coster will also be attending on behalf of Mr. Morgan, bringing the latest news on the Winchester merger."

Larry nodded, but that wasn't what he was concerned about; what he really wanted to know was when Colt would be able to do a post-mortem analysis.

After listening to Larry's question, Mr. Wallace pondered for a moment, then chuckled and joked, "As usual, if things go smoothly, we can finish the review this week; but if it's slow, it'll be next Monday. What, are you in such a hurry to use that money to buy land?"

Larry smiled and waved his hand, without saying anything more.

What he was really thinking about was the merger and formation of General Electric. Larry had learned from the shooting club that the Edison Electric Light Company was going to merge with the Thomson-Houston Company to form a new General Electric.

This highlights the advantage of Larry's "rebirth"—even though Larry didn't know the stock price performance of General Electric immediately after its IPO, he knew that in the long run, it was definitely a top-tier American company. So why wouldn't he buy such a stock?
Larry didn't even intend to buy; instead, he participated in the stock offering, which would give him shares with a lower face value.

At this point, when two companies merge, especially when the merger is led by large capital, there will usually be a share issuance.

Such stock issuances are usually marketed to insiders first. The so-called targeted issuance means that the shares are first locked in, for example, the original shareholders of the two companies, the friends of big capitalists, or Wall Street investment banks with large amounts of capital.

A company will only issue additional shares to the public through securities companies and securities brokers if it has raised a significant amount of capital.

Of course, it's easy to see that large corporations acquire assets at much lower prices than the general public. However, this isn't discrimination; it's simply a matter of wholesale and retail.

Larger capital firms that subscribe to more newly issued shares naturally enjoy a discount.

However, this is exactly what Larry is worried about. Edison Electric Light Company was already a star unicorn company in the country (the company was very large but not listed). Now that it is going public, large funds may sweep up all the newly issued shares, leaving Larry with no cheap original shares to take.

If you don't have original shares or newly issued shares, you can only wait until General Electric's stock is listed and then buy it on the secondary market, which is very uneconomical.

Because a company's stock price increases several times over at almost every stage, from initial public offering (IPO) shares to additional shares, and finally to listing and trading.

For example, the par value of each original share is $1, but before the merger of the two companies, the brokerage firm generally values ​​the original shares at $3 to $4 per share; when large funds participate in private placements, the share price they get is already more than $10.
By the time public investors participate and acquire the newly issued shares, the purchase cost will already be over $15.

Once the new shares are listed on the NYSE, the price could double or triple, and the price of each General Electric share traded on the secondary market could be over $60.

Larry's so-called "IPO subscription" in his previous life was actually about investors wanting to get relatively cheap newly issued shares, and then selling them to secondary market stock traders when they could actually be listed and traded.

The price difference is very tempting.

At that time, the United States was in the same boat. Those who participated in the primary market to make equity investments looked at the people who bought and sold stocks on the New York Stock Exchange as if they were homeless people and beggars eating leftovers. They were so pitiful!

Because the stocks available on the NYSE are "high-priced stocks" that have increased tenfold or even dozens of times compared to the original shares; they are the leftovers left over by large funds.

However, since the original shares have already increased in value by such a high multiple, those who buy them on the stock market will still speculate on them, which often allows the original shareholders to have a premium of hundreds of times when the shares are listed.

How could major shareholders and large capital groups not cash in on the readily available high profits?
However, at that time, there were too many listed companies in the United States, and there was no regulation, which led to many fraudulent companies going public, so the speculation on new stocks was not as exaggerated.

Sometimes, public investors can still get cheap newly issued shares.

But it's unlikely for a star company like General Electric!

Larry felt a pang of pain at the thought that he would most likely be forced to buy General Electric stock on the stock market: it's too expensive, not worth it!

However, on second thought, Larry realized that if he could see Mr. Coster in Hartford, he could try to use his connections there to see if he could get some cheaper private placement shares.

There's no way around it; if you can't grow big, you can't get lower discounts. The so-called investment banks on Wall Street never really deal in NYSE stock trading; they deal in these pre-IPO and post-IPO share offerings and bond underwriting. And that's how they make a fortune. On Wall Street, if you don't grow big, you're just eating other people's leftovers—that's the reality.
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When the two arrived in Hartford, a carriage from the Colt Company was already waiting for them.

As Larry passed by, he quietly arranged a meeting place with Mr. Dunbar and Matthew, and then rode in a carriage with Mr. Wallace straight to Colt Company.

It was already past four in the afternoon when we arrived at Colt.

But at this time, Colt was decorated with lanterns and colorful decorations, and the company was filled with a joyful atmosphere.

Mr. Andrew, the chief executive officer of Colt, specially prepared a welcome dinner for Mr. Wallace and Larry.

Everyone was dressed to the nines, and even Mr. Colt's widow, Elizabeth Colt, was present.

Larry also specially pinned on his pony badge, wore his most gorgeous clothes, and stood there, clapping and clinking glasses with the crowd.

The official celebration was held on Tuesday morning at 9:00 AM.

Mr. Coster arrived at Colt's celebration on time and took his seat in the hall early. After he sat down, he immediately spotted Larry sitting to the left of Mr. Wallace and nodded and smiled in greeting.

Larry smiled and returned the greeting.

The lengthy celebration was slow-paced and involved many steps, but it was clear that Colt's shareholders and directors enjoyed it.

At the end of the celebration, Mr. Koster solemnly announced from the podium that Winchester Firearms Company, along with three other small arms companies acquired by Mr. Morgan, would be injected into Colt.

With this, along with other cash-purchased shares, Mr. Morgan's stake in Colt will rise to 18.35%, making him the company's second-largest shareholder.

The crowd responded with enthusiastic applause.

At the celebratory banquet, Steward Andrew personally presented a tray of gold-cased pocket watches engraved with the image of Colt's pony, giving one to each of Mr. Wallace, Larry, and the other members of the bond underwriting team.

Furthermore, Colt will award Wallace Larry and others with a $3000 check each.
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After the celebratory banquet, a sumptuous lunch was served.

Larry found a spare moment and came to see Mr. Coster in person.

Mr. Coster was chatting with everyone while holding a wine glass, but when he saw Larry arrive, his eyes lit up. He quickly excused himself from the others and turned to stand next to Larry.

“Hello, Mr. Livingston. It’s a pleasure to meet you!” Mr. Coster looked at Larry with a smile in his eyes.

For some reason, Larry felt a chill run down his spine when he saw Mr. Coster's smile...

“Mr. Coster, it’s a great honor that you still remember my name.” Larry greeted him with a smile and exchanged a few pleasantries before getting down to business.

"Sir, I heard from my colleagues on Wall Street that next month, a merger led by Mr. Morgan will involve a capital increase and share issuance, and the company will be listed on the NYSE..."

After Larry finished speaking, Mr. Coster narrowed his eyes, his expression changed slightly, and he nodded, saying, "Mr. Morgan has led many projects, but there is indeed a similar company that will be going public!"

Mr. Koster did not mention the specific company name, which is the difference between personal relationships and business.

Larry nodded and simply said, "I have a client who wants to participate in the company's private placement of shares. I wonder if there are any channels through banks."

Larry's answer was also very clear: I'm not asking if you have the channels; I'm asking if, as a client, it's possible to have access to investment channels through Mr. Morgan's bank.

Mr. Koster thought for a few seconds, then looked up and asked, "...How much money do your clients have? If it's less than $100,000, then I'm sorry."

“We have $100,000 in cash,” Larry nodded.

Mr. Koster pondered for a moment, tapped his finger on his wine glass, turned to Larry, his eyes displaying a businesslike sincerity towards a client, and smiled as he spoke.
“Sure! There will be a private banking club within the company. Some shares will be available there, and some investment banks may not want to hold a large number and will sell the excess shares, or a portion of the shares used for collateralized financing. The price of these shares will be almost the original price, or slightly higher by 10%, but your clients will need to pay a brokerage fee of 5% to 10% of the total amount. Is that acceptable?”

Larry thought for a moment, then nodded and said, "That's acceptable!"

Mr. Koster nodded and continued, "Then you'll have to wait for my news. I'll find out how many shares will be leaked, which will take about three days. I'll send you a telegram then."

Larry waved his hand and said, "No need for that. After I finish my business in Hartford, I will also be going to New York to take care of some things. I can wait for your good news in New York."

“Excellent! Mr. Livingston, I didn’t expect you to be so well-informed…”

After Mr. Koster finished his business, his expression relaxed again, his eyes darting around Larry as he casually praised Larry's excellent information network.

Larry felt a chill run down his spine when he saw the look in Koster's eyes, and dared not stay any longer. He quickly arranged for Koster to contact him in New York and returned to his seat.

Mr. Wallace was busy with social engagements and didn't notice Larry's unusual behavior at all.

Back in his seat, Larry knew things were looking up, and a relaxed expression appeared on his face.

He thought it best if Colt stock resumed trading as soon as possible, so that he would have enough money to cover the stock subscription.

That's how it is in the pre-IPO market: you can't make money without the backing of banks, securities firms, or large capital; you can't make money with small amounts of capital; and you can't make money without connections. At this level, banks, securities firms, and large capital are playing a game on a completely different level.

Larry just stepped through this door today, having managed to get some credit by climbing the social ladder.

But Larry didn't feel lucky. Instead, he had a thought: if he grew his business, wouldn't he also need a shell to make money?
Making your own equity investments is like participating in the primary market; speculating in stocks is like participating in the secondary market.
However, the pre- and post-financing market, including financing, underwriting, and distribution, is also a huge and undeniable market!

(End of this chapter)