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

Chapter 157 Indirect Purchase of Newly Issued Shares

Larry thought the transfer of funds would go smoothly, but there were some procedural problems.

He previously had an account with First National Bank of Boston, so he can simply transfer the money back to Boston Bank.

However, Larry does not currently have an account in New York, so the $100 million cannot be transferred to a bank yet.

Larry was concerned about buying the newly issued shares from Mr. Koster on Sunday, so he rushed to a nearby bank.

Unfortunately, Morgan Trust Bank did not accept retail investors. Larry felt that his $100 million in assets was definitely enough to qualify him as a large investor, but he was afraid that it would be too much trouble to go to Mr. Coster, so he simply opened a temporary account at the nearby National City Bank in New York.

The account opening process was quite complicated, but because Larry had three checks from National City Bank of New York, issued by Paine Weber Securities, the bank knew he was definitely a Wall Street elite and thus skipped many cumbersome procedures such as verification of funds.

Larry's account at National City Bank in New York was finally opened at 1 p.m., and he quickly returned to Reading Securities with the account information.

Although it was Saturday, the brokerage firm would fulfill clients' transfer requests before closing time at 4 p.m., and Mr. Baruch had promised to wait for Larry, so when he returned to the Reading brokerage office, the front desk manager and brokerage counter tellers were all waiting there in an orderly fashion.

Upon seeing Larry's New York National City Bank account information, the brokerage teller nodded and began manually marking "Funds Frozen" on the client's kraft paper ledger, and started recording the withdrawal date and amount.

Then, a fund transfer application form is issued, which Larry must sign to confirm.

After everything was completed, the brokerage firm issued a paper draft for $100 million to the National City Bank of New York, which would be delivered to the National City Bank of New York by a special messenger sent by the brokerage firm in a horse-drawn carriage.

Larry watched as the other party completed a complicated transfer procedure and asked anxiously, "Can the funds be accessed before noon tomorrow?"

The brokerage clerk nodded and said, "We'll send someone to deliver it right away. It will definitely arrive today and shouldn't delay your access to funds on Sunday!"

Larry tapped the table with his finger and nodded, "That's good!"

At this moment, the front desk manager, Baruch, also came over and whispered to Larry, "Your commission rebate totals $12512. Should I give you cash or have it deposited into your account?"

Larry imagined himself looking bulky with $1 in cash on him, like a target for New York thieves, and then waved his hand, saying, "Just transfer it all to my account!"
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When I returned to Paine Weber Securities in the afternoon, Mr. Porter and Mr. Wallace were already waiting for me!

"Why did it take you so long to get back? Didn't you sell your stocks?" Mr. Wallace asked, frowning.

“No, I need to open a bank account. Otherwise, I can’t transfer the money out. I also want to subscribe to GE’s new share offering!” Larry explained.

Mr. Porter's eyes lit up when he heard the name General Electric, and he asked with a smile, "Hey, did I hear that right? You guys are going to subscribe to General Electric too? I heard the roadshow for this stock has only just started, how come you've already heard about it?"

Larry smiled, feeling there was nothing to hide from Mr. Porter, and then explained his idea of ​​subscribing to GE's newly issued shares.

Mr. Wallace made a profit of $20 today and feels like he's floating on air. He then said that he also wants to buy some newly issued shares of General Electric, but unfortunately he doesn't know how to subscribe.

“This stock probably won’t even be available for public subscription; the new shares will be distributed entirely within Wall Street!” Mr. Wallace exclaimed. Larry, not wanting to discuss Mr. Coster’s connections, remained silent.

Mr. Porter, however, looked intently at Wallace and Larry and said meaningfully, "Well, you two are actually the best performing employees in my sales department, yet you don't even know how to get GE's initial public offering shares... I'm so disappointed!"

Larry suddenly looked up and exchanged a glance with Mr. Wallace; both of them saw surprise in each other's eyes.

"Mr. Porter, do you have access to the newly issued shares?" Larry asked, raising his voice.

Mr. Porter pursed his lips and waved his hand, saying, "Sorry, I can't get the newly issued shares; I got the original newly issued shares..."

When the two heard Mr. Porter's first sentence, "There's no way to get the newly issued shares," they were a little discouraged. But when they heard the second sentence, "We can get the original newly issued shares," their expressions instantly changed from sadness to joy, even ecstasy!

Good heavens! The original shares issued to the original shareholders of Edison Electric Light Company or Thomson-Houston Electric Company were priced even lower than the shares issued to Wall Street big capital.

Is there really such a good thing? I'm not an original shareholder of Edison Electric Light Company. How could I possibly have the opportunity to buy newly issued shares that only they have?
After the initial excitement, Larry's eyes were filled with doubt as he turned to look at Mr. Potter.

Mr. Potter did not answer, but turned to look at Mr. Wallace, as if to test him.

Mr. Wallace racked his brains for a long time but still couldn't figure out how to get the original shares. His face showed embarrassment as he looked at Mr. Potter and said in a fawning tone,
"Mr. Potter, please stop testing me... just tell me the answer already!"

Mr. Potter snorted and waved to the two of them, saying, "Alright then, you don't know, I'll handle this business. Get your money ready, open an account at my branch, and I'll place the order for you."

"You really managed to buy the initial public offering (IPO) shares?" Larry was still a little incredulous.

Mr. Potter laughed and said one word, "Bonds!"

Larry was still completely confused, but Mr. Wallace instantly understood what Mr. Potter meant!
"Yes! Buy bonds! How could I not have thought of that? My damn stupid brain!" Mr. Wallace patted the sofa armrest with a wry smile, sighing repeatedly.

Larry still didn't understand, so Mr. Potter patiently explained.

Edison Electric Light Company and another company to be merged, Thomson-Houston Company, were both unlisted companies, but both issued corporate bonds on Wall Street.

If an investor holds corporate bonds of, for example, the Edison Electric Light Company, then they are considered a creditor of the company. Under current regulations on share issuance, bondholders have the option to participate in the company's new share offering.

This is the "preemptive right"!
According to Mr. Porter, both the Edison Electric Light Company and the Thomson Houston Company had bonds with an annual interest rate of around 6% and a face value of $1000 each.

For every $10000 of bonds held, one would receive 100 newly issued shares of General Electric.

This means that if the two wanted to buy GE's initial public offering (IPO) shares, they could simply buy bonds in the bond market now and indirectly obtain the IPO shares.

(End of this chapter)