"Goldman Sachs thinks this price is solid," Frank said, rubbing his temples in an attempt to clear his head. "George and his team argue that while Netscape is all the rage, the Internet is still a new concept without a proven profit model. And while we're profitable, Wall Street's conservatives still need time to digest our business model of selling virtual items. Setting the price lower will make the stock jump on day one, and everyone will be happy."
"That's just to let their big clients make a killing on the secondary market and make Goldman's underwriting performance look better," Takuya Nakayama said, slamming the file back onto the desk with a sharp thud.
Tom raised an eyebrow and walked over to the small bar to pour himself a glass of water. "You think it's too low?"
"Not just too low—it's practically charity," Takuya Nakayama leaned back in his chair, crossing his legs. "Frank, you've been in this industry long enough. You know the current momentum. We're not just selling software; we're selling tickets to a new world. And this ticket comes with a casino and a mall. Look at the Nasdaq now—what it lacks are stories that are both compelling and backed by cash flow."
"But if we set the price too high, what if they break the IPO?" Tom worried.
"They won't break the IPO," Takuya Nakayama interrupted, cutting off Tom's concern. "Look at our financials. ICQ's user stickiness already proves we're the undisputed giant in social networking. And those cash flows they don't understand? Those fund managers aren't fools. They know a real money-printing machine when they see one. $860 million? That's an insult to our users and an insult to the hair you've lost over the past two weeks."
Frank's eyes lit up. He leaned forward, the ruthless businessman returning to his face. "So what are you suggesting?"
"At tomorrow's pricing meeting with Goldman Sachs, we raise our bottom line," Takuya Nakayama said, holding up two fingers. "At least 20% higher than the current benchmark. They say they don't understand virtual goods? We'll teach them how to read a financial statement with the real cash we've earned from those very goods."
"$1 billion?" Frank gasped, his breath catching. "That's a psychological barrier! George will go ballistic. He's already worn his tongue thin trying to convince buyers to accept that $860 million figure."
"Then let him grind. We won't settle for less than $900 million." Takuya Nakayama stood up and walked to the window, yanking the curtains open.
The blinding sunlight flooded the room, dispelling much of the decadent atmosphere.
"Tell George that if Goldman Sachs doesn't dare take it, Sega's IPO will go to Morgan Stanley. I'm sure they'd be thrilled to partner with Sega. Silicon Valley Online isn't begging Wall Street for money anymore—we're offering them an opportunity. We're the number one Internet giant in the United States. Shouldn't they consider how this will affect their reputation as underwriters when other Internet companies go public in the future?"
Tom chuckled, crushing the paper cup in his hand and tossing it into the trash. "I knew you weren't just here to sign papers. Alright, if the boss has spoken, we'll be the villains in New York once again."
As night fell over Manhattan, low jazz music flowed through the executive lounge of the Pierre Hotel.
George Fischer was in a good mood, even ordering a bottle of vintage single malt Scotch.
In his view, the roadshow was over, the deal was done, and all that remained was to await the bell-ringing, collect the proceeds, and enjoy New York's nightlife.
Frank sat opposite him, ordered no alcohol, and asked for a soda with ice.
"Relax, man," George said, pushing a glass of wine across the table with a professional smile. "The roadshow was a huge success—five times oversubscribed. Goldman Sachs is thrilled with the numbers."
Frank ignored the wine and slapped a freshly printed document onto the table.
The paper made a soft sound as it landed on the polished wood, but it was enough to make George withdraw his hand from the wine glass.
"We're raising the price," Frank said bluntly.
The complacency on George's face froze for half a second before returning to normal. He assumed this was a case of pre-IPO jitters. "Don't joke around. The prospectus is already filed, and the price range was meticulously calculated—$14 to $16. That's the sweet spot, balancing fundraising needs with room for growth in the secondary market. Everyone makes money—that's the Wall Street way."
"If we keep the water level too high, we'll drown." Frank's knuckles rapped on the table, the rhythmic tapping interrupting George's lecture. "Mr. Nakayama has reviewed the report. He's not satisfied."
"He's not satisfied?" George found this absurd. He leaned back, "He makes game consoles, not finance. This is New York, not Tokyo."
"His demand is simple: add twenty percent."
George nearly choked on his own spit. He set down his glass, leaned forward, and lowered his voice. "Do you know what you're saying? Adding twenty percent would push our valuation toward a billion dollars. That's what companies like Netscape, which sell actual software to users, get. You're selling virtual clothes and digital pets—at their core, those are just lines of data on your servers! The fund managers will be calling us non-stop, calling us crazy."
"We're selling social connections. In the US, no one can live without social interaction," Frank corrected. "Besides, our cash flow is better than Netscape's. Look at the data, George—think about the user profile of Silicon Valley Online. Do you know how much that's worth?"
"Investors need security! They don't care about sentiment!" George said, his voice tinged with frustration. He unbuttoned his suit jacket, trying to relieve the tightness in his chest. "Listen, Frank, if we change the price now and the offering fails—if it tanks—where will Sega's reputation end up? Where will Goldman Sachs' reputation end up? No one dares take that risk."
Frank leaned back in his chair, crossing his arms and striking a defiant pose. "That's your problem as the underwriters. Mr. Nakayama said it best: if Goldman Sachs finds this price too hot to handle, we'll just switch to a cooler underwriter."
George narrowed his eyes, watching him warily. "What do you mean?"
"Morgan Stanley has been contacting us," Frank said casually, dropping the bombshell. "They're very interested in Sega and are even willing to underwrite the entire offering. Tom was just looking at the fax from Morgan Stanley—their terms are much more favorable than yours."
This was, of course, half-true and half-bullshit. With the IPO just a step away from completion, changing underwriters at this stage would be a major blunder—enough to ruin the entire process.
But George didn't dare gamble.
Sega wasn't some small company begging Wall Street for scraps. It was a multinational giant with a massive cash flow.
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