Chapter 47 - 47 Dronne and Baron Thompson's Short Selling
With Valier's name out in the open, the speculative battle over Oclair Trading Company began to attract the attention of the 'lantern-followers' (T/N: retail investors who follow the lead of major speculators). It was an open secret that Valier was a subordinate of Aurora, and if that Valier was targeting Oclair Trading Company, people assumed there must be some significant material behind it, leading many to follow his lead.
The one throwing sell orders against those buys was Dronne Trading Company. Dronne Trading Company was a brokerage, but rumors spread that the sell orders were likely their own proprietary trades, which attracted followers to that side as well.
The shares Dronne Trading Company procured for short selling belonged to the nobles who hadn't sold to Valier, and among them were the holdings of Baronet Parker, Steve's brother-in-law.
Even with short selling, one cannot perform 'naked shorting'—selling shares that don't exist—infinitely. If that were possible, the shareholder register would become a mess. If both the selling and buying sides had infinite funds and naked shorting was executed, the number of shareholders would exceed the total number of shares issued. If that happened, the question of who held management rights would become a problem. That is where it differs from futures trading.
Therefore, Dronne Trading Company also needed to borrow shares from shareholders in order to short sell.
Dronne was holding a secret meeting with Baron Thompson at the Baron's townhouse in Sowell Land.
"Thanks to the information your Excellency procured—that Oclair Trading Company will not be starting transactions with his Excellency the Margrave—the stock price has hit a ceiling. It seems Valier and his followers are supporting the price with buys, but the main player, Valier, is in a financial pinch and is borrowing money from Salieri Trading Company and Emmanuel Trading Company. Even though he's putting up Oclair shares as collateral, both companies are selling them off in the market, so the supply of shares to be bought up isn't decreasing."
"The fact that Salieri Trading Company has turned to selling is the best evidence. Well, I did probe his Excellency the Margrave, and he flatly denied any such movement. I'm thinking of putting in more short sells around here; is it possible to procure more shares?"
Baron Thompson was getting greedy and considering increasing his short position.
Dronne nodded.
"I have already spoken with the guildmaster of Oclair Trading Company. He also thinks the current stock price is abnormal and will drop soon, so when I dangled a 5% interest rate, he nodded immediately. After all, if he sells his own holdings, his management rights would be further diluted, so he likely won't try to sell them openly."
Since the shares circulating in the market were becoming scarce, Dronne was plotting to procure shares from the guildmaster of Oclair Trading Company, the largest shareholder.
If Baron Thompson hadn't suggested it, Dronne had intended to sell them himself.
"To think the management itself would support the price of shares they intend to sell... Valier has truly missed his timing to withdraw."
"If he were to achieve greater success than us with the same stock, it would affect our future business. I should like to see him fail spectacularly."
"And if that happens, our profits will skyrocket."
"Indeed."
Baron Thompson and Dronne believed that Valier's failure would both bring them profit and protect their reputations.
At this point, the stock price had already risen to double what it was when Dronne had set his trap; if Valier were allowed to take his profits now, Dronne would lose all face.
That thought drove him to procure the loaned shares from the guildmaster of Oclair Trading Company.
Dronne let out a dark chuckle.
"Valier failed once before in the copper market. He must have been desperate to stage a comeback here. To think he'd increase his buys at the very point where he should be selling out."
"He defected from Viscount Karsh's side to his Excellency the Margrave's, and since then he hasn't had any major achievements. There must have been some desperation there."
Baron Thompson nodded deeply at Dronne's words.
Although he maintained his status as a broker through Aurora's mercy, it was natural to think that if he proved useless, Aurora would abandon him.
This was something not just Dronne and Baron Thompson, but many others thought as well.
That was precisely why some believed he would make this market a success, while others thought he was pushing too hard and would fail.
"For now, the loan agreement is for two months, so it would be ideal if he went bankrupt by then."
"Come to think of it, there is a party hosted by his Excellency the Margrave in three weeks. I shall obtain a commitment from his Excellency there in a way that everyone hears. Once I do, the rumor will spread instantly and lead to selling."
"Then, let us make sure to sell at high prices so as not to break the value until then. We need Valier to support the price as much as possible, otherwise we won't get a good price range even if we short sell."
Their conversation was, as expected, leaked to Steve via the spiders in the room.
Steve visited Valier with that information.
"It seems Dronne has procured shares from the guildmaster of Oclair Trading Company."
"Yes, I have heard as much from the guildmaster."
"Seeing as the guildmaster told you without hiding it, it seems he has no intention of betraying us."
"Knowing your Excellency, you must be monitoring the guildmaster of Oclair Trading Company as well, right?"
Valier believed that Steve was monitoring everyone involved. Therefore, he assumed Steve knew everything he was talking about.
And that was exactly the case.
"Well, it's more for protection than monitoring. There's a possibility the opposition might attack the guildmaster of Oclair Trading Company to drive the stock price down, after all."
"I see. He is indeed a person whose attack would cause the stock price to fall, besides myself."
Valier lightly patted his forehead with his palm.
"Also, you probably know the loan period is two months, but it seems they plan to get a public commitment from his Excellency at the party in three weeks that he has no intention of doing business with a new trading company. They intend to sell all their shares by then."
"I don't have enough funds to buy all of that up, however."
"I'll provide you with an unsecured loan. At the same time, I'll also buy shares in a way that follows your lead. I'll also tell Salieri Trading Company and Emmanuel Trading Company to buy back the collateral shares. However, if they buy them back all at once, the opposition will notice, so it'll be done in small increments. But it would be nice if that makes the opposition mistakenly believe they are successfully short selling at high prices without breaking the value."
Valier narrowed his eyes at Steve, who was speaking with a smile.
"Knowing your Excellency, it would be easy to lead the opposition into such a misunderstanding."
"There's nothing easy about the market. If it were easy, I'd make it my main business. Running a factory is much easier."
Saying that, Steve thought for a moment.
"No, neither of them is easy."
"They may not be easy, but looking at your Excellency, you seem to be enjoying both."
"Is that so?"
That was something Steve himself hadn't realized.
However, what Valier said was correct. In his previous life, he had passed away in the middle of rebuilding a factory and hadn't felt a sense of enjoyment.
Now, the reconstruction of his territory was progressing smoothly, and while he felt it was worthwhile, there was also a sense of happiness.
"I have known nothing but being a merchant since I was young, so I don't understand factory management, but merchants and factories are the same in that they both try to produce profit. It's enjoyable when profits are coming in."
"Now that you mention it, that might be true. If it turned into a deficit-running operation, I'd probably agonize over why I even started such a thing."
"I believe a person's true essence comes out depending on whether they throw it all away at that time. If you run away, you can never do the same business again. It's rich coming from me, but business is built on trust, after all."
"I've certainly felt that."
Steve was remembering the creditors from his previous life. He had borrowed money from banks and relatives, and he felt he wouldn't be able to face them if he just closed the business and declared personal bankruptcy.
Even if there were no legal issues, the human heart does not move by law alone.
Just because it is legal, almost no one is satisfied with the exemption of debt repayment.
"If you struggle from a young age, you'll age quickly."
Valier, who did not know of Steve's previous life, gave that advice under the misunderstanding that Steve was worrying now.
"If I go bald early, I wonder if Chris-chan will be sad?"
"For a person of your Excellency's stature, the presence or absence of hair shouldn't matter."
"I hope so. I'll ask her next time."
The conversation ended on the topic of hair, and Steve left Valier Trading Company.
Next, Steve arrived at Emmanuel Trading Company.
There, the guildmaster, Emmanuel, came out to greet him.
"What business brings you here today?"
"I've come about 'that' matter."
"Understood. Then, this way."
With the veiled word 'that', Emmanuel understood it was an important conversation and led Steve to the usual small room.
"If you say 'that' now, would it be about Oclair Trading Company?"
"Correct. Dronne has finally procured shares from the guildmaster of Oclair Trading Company and is going to launch a full-scale sell-off. I want Emmanuel to buy back the collateral shares pledged by Valier. Also, buy Oclair Trading Company shares under my name. However, so as not to let the opposition realize it, don't buy them all at once; buy them little by little. The deadline is within three weeks. That's when we wrap it up."
"Understood. Is it finally time?"
"I'm sorry I could only let Emmanuel make about as much as a commission fee this time."
"No, since profit is being made, I have no complaints. There is nothing easier than making a profit with zero risk."
This time, Emmanuel Trading Company wouldn't see the kind of profits they had during the copper market. However, in order to deceive Dronne and Baron Thompson, Salieri Trading Company and Emmanuel Trading Company were not allowed to make moves that would generate massive profits.
To increase profits, the only way was to skillfully time the buybacks of the collateral shares against Dronne and Baron Thompson's short selling. It was like being a securities dealer who ensures their own company's profit while handling a client's large order.
"What concerns me slightly is that Salieri Trading Company has recently been buying shares of companies that handle casting materials. They've also been buying shipping companies and apparel-related guilds, but I get the feeling those are just smokescreens to buy the casting companies."
"Hmm."
Hearing Emmanuel's story, it clicked for Steve.
"That's his Excellency the Margrave's order. It's better not to touch those."
"Would I be punished if I interfered?"
Aurora's aim was to maximize her own profit by riding on the coattails of Steve's finishing moves. However, Steve was the main player to the end, and Aurora herself would not initiate a market play.
In other words, her exit would be early.
It wasn't impossible to assist that side as well so that Steve and Emmanuel could sell out, but he believed that greed ruins the person.
"No, you'd just become his Excellency's bait. 'The monkey reaching for the moon' (T/N: an idiom meaning to ruin oneself by seeking what is beyond one's reach). Greed that doesn't fit one's stature ruins the person, after all."
"I should like to try measuring your Excellency the Dragon Wing's stature once. To have achieved military feats before coming of age, received the Dragon Wing Medal, and be peerless in both business and the markets—just how great is your stature?"
Emmanuel teased Steve playfully.
"It's not like that. I never chase profits beyond the plan. I don't have the ability to respond flexibly, you see."
"Indeed, your Excellency is always according to plan. Perhaps it is because that plan is already perfected."
"Not really. I just decide on the 'settling point.' Anything beyond that is outside the plan. If so, the correct answer is not to do it, right?"
Steve did not aim for additional profits to the point of changing his plans. That was the secret to not making major failures. Hypothetically, if he had aimed for further territorial expansion during the war with the Kingdom of Forest, he wouldn't have been able to maintain the overextended front lines and would have been pushed back. After all, Steve alone was the offensive piece.
The current prosperity existed precisely because the royal castle was occupied in a short period and an early peace was realized.
Emmanuel asked himself if he could have stopped at that point if he had the same abilities as Steve, and the answer was no.
The awe of the child before him, who calmly practiced self-restraint that even adults could not manage. That feeling was always present.
"Humans find it quite difficult to restrain their greed. In particular, the regret of missing out on a profit is stronger than the regret of taking a loss, so one inevitably pursues unnecessary gains."
"Well, I suppose so. That's why people jump onto stocks or commodities that have risen in price. If there were many people who could take profits moderately, a speculative battle wouldn't even be possible in the first place."
"It is as you say. Then, starting tomorrow, shall I set about drawing out the desires of Dronne and Baron Thompson to the fullest?"
Emmanuel promised this, imposing a quota on himself in an attempt to get even a little closer to the boy who understood the human heart.
And from the next day, the buybacks involving Salieri Trading Company began.
Normally, large-scale buybacks would cause the stock price to rise, but since Dronne, who had procured shares from the top shareholder, kept selling more and more, the selling never ran dry.
For the next three weeks, until the day of the party hosted by Aurora—the limit both sides had decided upon—heavy trading of Oclair Trading Company shares continued.