July 4, 2008

Excited Delirium Book: Chapter 43 (OMNINet – Tri-X IPO)

By liam

Author’s Note: The following is Chapter 43 of the my online book "Excited Delirium". Please post comments. Please tell your friends about this story. If you’ve missed a chapter, please click here for Chapter 1 (Prelude) or here for the full index .

“It’s not every day that someone just hands you $100 billion in a day,” boasted Garamond.

“No sir,” Hadlock drooled. “This is indeed a very rare day. Especially given today’s economic climate," he added, referring to the general state of financial and economci malaise in the US.

Garamond ignored Hadlock’s last comment and continued: “I remember back in the early dot-com days – well, even closer to the end – we were raising billions with each offer, but this time it’s very, very different.”

“How so, sir?”

“This time we’re getting one-hundred percent of the take and we don’t have to share anything with these oafish little programmers that think they’re God’s gift to the digital world.”

“Well, we still have to funnel some of the actual final amount into Greyrock and a few other subsidiaries, of course,” Hadlock reminded him.

“Of course. Some. Maybe a little. Not much,” Garamond said, almost dreamily.

“I think the crew is waiting for you, sir. Are you ready to go ring the bell?” asked Hadlock.

‘Ringing the bell’ is an extremely prestigious event for owners of companies that undergo the Initial Public Offering (or IPO) process on the New York Stock Exchange. The top representatives of the company go down to the floor of the NYSE and ring the 9:30AM opening bell, initiating trading for that day. The activity is akin to an inauguration into the financial establishment. In comparison to older days, it’s like the peal of the church bells declaring that it is time to come to your pews and pay your dues. In this case, it couldn’t be closer to the truth.

The Tri-x (pronounced TRY-EX) IPO was one of the biggest in NYSE history. It represented everything that America stood for. Security in the time of instability. Money. Strong growth. Connections to all of the best in the media, military, industry, government and educational strata. Monopoly. Religion. God. How could you not win when God was on your side? And in your portfolio?

Tri-x was an amalgamation of all of the organizations owned by Griffith Garamond, Simon Hadlock, a number of directors with the OMNINet and several dozen extremely influential leaders and families of the United States. Even the President’s family was one of the sources of seed capital and they were all excited about rolling up a number of OMNINet enterprises into one vast financial blob that would suck the last funds held by the middle-class into the tight fists of the people that ran the American economy.

The links between government excess and privately-held OMNINet companies were not obvious to the general public, but in the run-up to the IPO, the media frenzy surrounding the IPO was constant and unstoppable.

Examples were given as to the vast array of contacts that helped make this happen and whispers and hushed comments were shared amongst blogs and other chatrooms about how the OMNINet was the ‘darling’ of so many of the elite financial backers in New York and elsewhere. Rumours swirled, many egged on by the International News Corporation (INC), a media company controlled by the OMNINet, that the various holding companies were used by several government officials as trust companies when they took public office. It was this power and influence that inspired people to believe that it would be impossible to lose money on the Tri-X IPO.

The past had been wonderful, but great things were still planned for Tri-x. At least, that’s what the public was told by the media. What the stories didn’t disclose was that the senior people had pushed through legislation that would allow them to bail out the instant the company was in public hands.

The moment the bell rang, the liability of the company went from a few dozen of the most vile people in the history of humankind to the hands of America. Tri-X would be the world’s problem now and not that of a select group of insiders.

What the stories didn’t tell a hungry public was that the constant supply of cash from the US Treasury was about to dry up. The contracts would disappear, cash flow would plunge and the stock price would drop shortly after.

All that would remain is a carcass of a creature, pushed on to the shore to die like a cruel tide shoves a whale to a sandy shoal.

To understand what was happening, one has to look back on the recent history of ‘going public’. In the ‘good old days’, IPOs were legitimate and were done to improve the financial health of a company. The rush of cash was like an electric shock, spurring a motor to life.

However, IPOs have undergone a radical shift in value and are now used to plunder the saving public of any cash reserves they might have had after taxes and the cost of living took away what little they earn.

Today, the financial system has failed the general public because since the early 1980s, brokerages have come to market with the same formula: leverage a unique idea using seed capital from your close buddies, grow it to outrageous proportions mainly as a result of your healthy connections, destroy the company’s cash flow by granting unusually generous stock options to everyone around you, grow it to excessively bloated conditions, paralyze it with rules and regulations and internal politics, float it to the public, release a few rosy reports and then a few years later – well after the initial owners are out of the picture and have passed the minimum holding dates – watch it crash and burn as the reality kicks in.

Enron’s a great example.

The ever hopeful public waits for a reprise, but sits and reads about lower stock prices in ex-Tri-x newspapers each morning while munching on their corn flakes and soy milk (both of which are also produced by Tri-x related companies).

Every time, it’s called “pumping and dumping”.

Every time, the loser is Joe and Jane Public as their savings get sucked into a whirlwind of lie and deceit.

Every time, small people get more dependent on the machine as they lose more.

Every time, the cheshire grins of the fat cats expand showing more polished teeth than ever, quickly turning to a sneer in their ultimate disdain of the average individual, many of whom thought they were great investors.

Every time, the capitalist system works … for those that own it and occasionally lend it out to others.

Tri-x was no different. During the weeks that preceeded the IPO, thousands of stories were run by the press gushing about its cash flow, the opportunities it had cornered, their connections and yes, their profitability.

Some of the buzz-words they used? Every year, for the last nine years, the company had made well beyond double-digit growth rates, making it an exception on the Street. The management was the best and brightest seen running a company in years. Analysts were all giving their thumbs up. Nothing could go wrong given their business approach.

The Tri-X IPO would come to be known as one of the last great IPOs that actually extracted money from the public. Ironically, most money was flowing the other way: privatization was a trend that was overtaking the world of finance. It was not necessarily because it was more profitable, even though it was and will be. This trend of privatization was a show of the lack of faith that the country’s leaders had in the public’s ability to save money and put it into investments.

With privatization, leaders of organizations could skirt the vast and complex rules associated with public finance. The lack of scrutiny from once important organizations like the Securities Exchange Commission meant private organizations could do what they wanted, where they wanted it and without anyone getting in their way.

To repeat, the Tri-X IPO was not about making Joe and Jane rich, but was about squeezing those last few drops of blood from a stone cold public.

By the start of the big day, anyone who had a broker that could get you even a few hundred shares (at market price) was hot shit on a silver platter. The vanity ran deep. If you weren’t in, you were out. This IPO had Google and Mastercard beat by billions and by prestige.

It was America.

It was 9:29 and Garamond and Hadlock looked at each other with a cool and calm look in their eyes. Today would be a day to remember because it would offer the biggest paycheque that they would ever see in their lives.

At 9:30, Garamond and Hadlock simultaneously slammed the button used to launch the New York Stock Exchange into a frenzy of activity.

At the loud drone of the bell, the Tri-X stock opened at $82, $32 or 64% above the IPO price of $50. Two-billion shares were being issued, making the market capitalization of the IPO worth $100 billion. With a trading price of $82, the revised market cap was now $164 billion, close to the annual budget of Canada’s federal government.

By mid-day, the stock had peaked at $108 and then floated down to a cozy $97 per share. After several weeks of media hype, the company was now worth $194 billion. All this from a few million bucks in seed capital and glad-handing.

Garamond had become a very popular man. He had just committed one of the world’s biggest heists and everyone loved him.

(Note: "Excited Delirium" is a work of fiction. Any person, place or thing depicted in this work of fiction is also a work of fiction. Any relation of these subjects or characters to real locations, people or things are an unintentional coincidence.)

Read more with Chapter 44

Did you miss a chapter? If so, click here to see all chapters or click here to go to Excited Delirium: Chapter 1 (Prelude)

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Excited Delirium by Liam Young is licensed under a Creative Commons Attribution-Share Alike 2.5 Canada License .
Based on a work at www.exciteddelirium.ca .