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

Chapter 46 Insider Information (Seeking monthly votes and recommendations)
Colt is going to expand its factory's production capacity! This is obviously insider information, no doubt about it.

Although Larry only worked at Paine Weber Securities for a few months, he is now a seasoned professional in the financial industry and has a high sensitivity to relevant information.

Every major business activity of a listed company can be reflected in its stock price.

For example, excessive dividends and excessive orders can drive up stock prices. Moreover, since it is still the late 19th century, the regulation of listed companies is often very lax.

Many insider tips prompt insiders to make advance arrangements, and then, once the information becomes known to the public, these insiders dump the stocks they have already bought on the enthusiastic public. This is called market manipulation.

However, insider information circulates only within a very small circle. It is a way of exchanging benefits in high society, or even a social need. Therefore, it is generally difficult for other industries to know insider information related to a company's stock price.

The financial industry is excluded.

Banks and their money brokers, along with securities firms that rack their brains every day to connect investors, move between various companies and have access to a wealth of relevant information.

Larry never imagined that he would become a witness to one of these insider tips today.

Larry's heart was pounding. He desperately hoped to receive good news today so he could take the opportunity to make some money.

After the other executive finished speaking, Wallace began to introduce Paine Weber Securities' financing plan to Colt's executives. The plan mainly involved using the Wall Street bond market to market corporate bonds to major clients. However, if Colt found the financing interest rate too high, they could also issue new shares to provide Colt with equity financing.

As Mr. Wallace was speaking, the observant Larry had already opened his briefcase and handed Mr. Wallace the neatly categorized documents.

The latter then passed the information to three executives.

As the three executives reviewed the documents, Mr. Wallace would occasionally introduce the company's successful financing cases to them one by one, and he would also make his own judgments on the interest rate considerations.

Larry watched the three executives' reactions nervously, afraid that he might have missed some crucial information.

The tall, thin representative of Colt's three senior executives finished reviewing the documents, nodded, and calmly looked at Mr. Wallace, saying...
"To be honest, we are also in contact with banking groups, and they are willing to provide us with loans at an annual interest rate of 6%."

"6% is too high! Besides, it will take time for your company to go from expanding the production line to putting it into operation. If this is delayed for two or three years, even if your company's products are highly profitable in the future, it will still have a significant impact on the financial statements." Mr. Wallace frowned.

"But the corporate bonds you offer are not low either, at 4.5%. If you include the underwriting fees of the securities company, the fees for the first year will exceed 6% by a lot."

"Therefore, I suggest using stock issuance to supplement financing, which can minimize financing costs..."

……

While the executives and Mr. Wallace were engaged in a heated debate, Larry watched with growing suspicion. The most crucial question he was concerned about remained unanswered: What exactly was Colt's reason for expanding its production scale?
After Mr. Wallace explained his financing plan in detail, the three executives whispered for a while, seemingly reaching a preliminary consensus.

The tall, thin executive continued,

“We currently have two projects, and based on your introduction, we have tentatively decided that at least one project will utilize your company’s financing plan.”

Mr. Wallace's eyes lit up, and he quickly asked,
"Could you give us a brief overview of these two projects? That way, we can analyze which project is more likely to secure oversubscription based on the projects' willingness to purchase bonds..." The tall, thin executive nodded, raised a finger, and said...
"The first expansion project is the Colt M1889, an innovative invention of our company. The six-round magazine can be ejected to the left, greatly increasing the loading speed! The initial version of this pistol had many problems, but after two years of improvements, we have designed a very reliable improved version, and the expanding U.S. Navy is ready to officially procure and equip this pistol..."

The tall, thin executive spoke in a calm tone, as if casually recounting yesterday's dinner, but to Larry, it sounded like a resounding bell, like a thunderclap!
Could the pistol that the tall, thin executive mentioned, which can be flung to the left and ejects its magazine, be the legendary "revolver"?

Based on Larry's understanding of firearms, revolvers at this time were fixed in place, making loading cumbersome. After firing six rounds, the old cartridge cases had to be extracted one by one before new rounds could be loaded. Moreover, this could only be done through a small loading port.

Based on his memories and knowledge from his previous life, Larry always thought that a "revolver" pistol should be able to be ejected from the magazine, empty the spent cartridge case, and then reload the bullet.
Larry later learned that due to manufacturing processes or design issues, the problem of moving the magazine could not be solved at the time, so the magazine had to be fixed.

But after hearing what the Colt executives said today, Larry finally understood that the revolver that is known to later generations was actually first created by this Colt M1889.

It is no exaggeration to say that this will bring about another revolution in the world of firearms.

But actually, this news isn't important, because things like "significant importance" that will be proven by history have no meaning for boosting stock prices.

The most important information is that the US Navy has officially made the purchase!

Only news like this can trigger a surge in stock prices...

Larry was thrilled by the news, but then he heard the executive say that this was just one project. What about the other one?

Larry listened intently as Mr. Wallace and the other party repeatedly discussed the technical issues of issuing bonds for the project. It was quite a while before news of the second project came in.

"The second expansion project is the water-cooled machine gun that we are working on with Mr. Browning! Mr. Browning is a genius gun designer. I think if Mr. Colt could see Browning today, they would become close friends despite their age difference."

The tall, thin executive briefly reminisced about the company's founder before continuing, "Currently, our company's flagship product, the hand-cranked Gatling gun, still has significant flaws. On the battlefield, many shooters, due to nervousness, crank the gun too quickly, thus affecting its firing performance. We urgently need to undertake a technological revolution in the machine gun industry..."

Wallace nodded in agreement, and Larry also nodded in agreement.

This makes it even more significant!

Larry had never seen a hand-cranked machine gun in his previous life. The late 19th century was a crucial period for the development of many new technological products, and Larry had seen two of them today.

"Did this project also receive a contract from the military?" Mr. Wallace was more concerned about this question.

The tall, thin executive shook his head. "We are still developing this project, but because the automatic firing method is different, we need to invest some money in major technical improvements."

Mr. Wallace nodded, indicating that he understood;

Larry nodded, indicating that he didn't think the production line would have much impact on the stock price; it would only be meaningful to him when there were actual orders.

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(End of this chapter)