[Chapter 328: Greedy Wall Street]
Just after finishing the conversation with Bill Gates, the CEO of Morgan Stanley, Basak Morgan, approached proactively with a glass in hand. "Mr. Anderson, let's find a place to sit down."
Though Linton was a bit puzzled, he agreed readily, "Sure."
They found a quiet corner. Seeing Linton's curious look, Basak spoke first. "Mr. Anderson, does your company, Linton Films, have plans to go public? Morgan Stanley is ready to provide comprehensive services."
"Going public? Not something I've thought about yet."
"We've noticed your company has produced many market-hit films with promising profitability. If you go public, investors will definitely flock to it."
"But our company has very ample funds; why would we need to go public?"
"No, you really need to. As your company grows bigger, the competition will intensify. The Hollywood giants won't just let you flourish. You need more backing."
"Seems like you know Hollywood quite well?"
"Of course. We deeply research every profitable industry, and all profitable industries rely on our support."
Basak's tone was cocky but not without reason. Linton didn't press too hard.
"You said if my company goes public, those Hollywood giants won't suppress me?"
"If you go public, we can bring in some very powerful strategic investors who can assist you and even protect you."
"Like who?"
"For example, investment funds from General Electric, the Rockefeller family, the Roosevelt family, the Kennedy family, and so on. They're all very interested in your film company."
Pretty heavy hitters, but what good are they? Do they know films? Can they influence Hollywood? From what he knew, Wall Street capital had been burned by Hollywood giants more than once.
"Any other benefits?"
"Of course. Other risk defenses, I won't go into. Also, after going public, your personal wealth will grow significantly."
"By your evaluation, how much is my film company worth now?"
"Including UPN TV Network, about 3 billion dollars."
"Only 3 billion including UPN? How about excluding UPN?"
"At most 2.5 billion."
"Do you know how much profit my film company made this year?"
"According to our research, about 550 million dollars."
Was that so inaccurate? Off by at least 100 million. Their business capabilities seemed poor.
He knew The Fault in Our Stars had just finished last month, and all income was rolling in: North American box office splits, merchandise, TV rights, VHS rights, overseas rights, soundtrack shares -- adding up to about 150 million in revenue for the company.
Even though the company had recently spent 170 million buying UPN, it still had 190 million in cash on hand.
Moreover, they held over 800 million in stocks of various computer and communication public companies, which were doing well with huge potential.
Since last year, Linton had hired Winnie as the company's financial advisor. The company kept up to 200 million in cash flow, and invested the rest in stocks through Winnie.
Hearing Basak's valuation, Linton laughed in disbelief. Even ignoring their inaccurate research and the cash and stocks on hand, valuing a company with 550 million in profits at just 2.5 billion was a stretch.
"So you say for a 550 million annual profit company, the market value is only 2.5 billion -- how do you arrive at that?"
"That's already generous. Your company is just a few years old. You know, the film industry is high risk. Just because profits are high now doesn't mean they'll stay that way. Look at United Artists, which went bankrupt, and MGM, a declining giant. They're all Hollywood heavyweights. Also, your foundation is too shallow. How will you survive when others crackdown on you?"
"If you think the risk is so high, why do you want to get involved?"
"With our help, risks become manageable. In America, going solo is the worst taboo you can commit. You need to learn to share."
"So basically you're asking me to give you shares at bargain prices?"
"How can that be called giving away? It's about forming an alliance, where we protect you and bolster your risk resistance."
"Forget it. Take your robber's logic to someone else. I don't need it."
"Mr. Anderson, you might not realize how dangerous your situation is."
"You know?"
"Of course."
"Tell me."
"I can't share too many details, but I can say that besides Universal, the other six Hollywood majors have met specifically to band together against you."
"Is that all?"
"Isn't that serious enough? Don't think Universal can protect you -- they can't. Plus, their interests don't fully align with yours, unless you're willing to be acquired by them."
"Oh, if I decide to go public, what are the terms?"
"First, there's a pre-IPO round to bring in strategic capital."
"Funding at a 3 billion valuation?"
"Right."
"How many shares do I need to give?"
"At least 30%."
"Why so much?"
"That's not too much. We're helping you fight against an entire Hollywood coalition. Too few shares won't cut it. Also, you personally currently own too large a stake."
"What do you mean?"
"Post-IPO, for the company's healthy growth and shareholder rights protection, the largest shareholder can't hold more than 50%. We open one financing round before going public, and the stock offered during the IPO is usually 20% to 25%."
"Is there a law limiting a shareholder's stake to under 50%?"
"No, that's a consensus between Morgan Stanley and the strategic investors."
"Sounds like you think I'm a sure thing."
"No, no, you're mistaken. We're here to help you through tough times."
"Sorry, your help comes at too high a price. I'll find someone else."
"Mr. Anderson, trust me, we're the most sincere. Whoever you approach, the terms won't be better than ours."
Hearing this, Linton no longer wanted to listen. He'd long heard about Wall Street greed, but he hadn't expected it to be this bottomless. They were trying to use the chance of Hollywood giants suppressing him to sneak in and rob him -- what a pipe dream. "I'll think about it when I really need it."
*****
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