In 1998, Lenovo had approximately 1.7 billion shares. Due to the financial crisis, its stock price was around 1.4 hong kong dollars, giving the company a market capitalization of about 2.4 billion hong kong dollars. This market capitalization clearly did not represent Lenovo's true value; one could buy it with eyes closed and not lose money. Unfortunately, the financial crisis was about to end, and Lenovo's stock price would likely surge. As for the risk of insider trading, it was not significant. Ji Jiasheng was only worried that He Zhengcheng lacked experience and might get carried away. Of course, He Zhengcheng had previously helped his father's account buy Lenovo shares and hadn't yet focused on his own. Lenovo's stock trading volume was not large, making large-scale acquisitions complicated.
Next, He Zhengcheng handled the USB drive R&D contract while also preparing for Wednesday's investor meeting. He exited his twenty Hang Seng Index long positions near 8,000 points, earning over 600,000. After deducting 2 million in R&D investment, legal fees, insurance, etc., he still had over 5 million in cash. He planned to buy shares in Lenovo when he had time. In fact, others at Shanhai Capital also wanted to buy, but they were constrained by the low trading volume. The company had just been established, and there wasn't enough time.
Wednesday's investor meeting was held at the newly renovated Shangri-La Hotel. This was the first time all six partners appeared together before investors. He Zhengcheng dressed maturely to avoid being underestimated. Fortunately, the main points of the research report came from him, so it was signed by him.
By now, everyone had largely confirmed the potential bankruptcy of Long-Term Capital Management. Even today, the company's liquidity had dried up, and no one was willing to trade with it. Its investors were also worried about not getting their money back and were demanding redemptions, plunging Long-Term Capital Management into a precarious situation. The company's founder had also returned to the United States; he might not face bankruptcy, but he would certainly be taken over.
"It is said that Long-Term Capital Management's founder has approached Warren Buffett and Goldman Sachs, but both have refused. They might truly have no more chances," an investor named Zhang Zhiyuan approached He Zhengcheng for a chat.
"We should look at Long-Term Capital Management and its shareholders separately. The possibility of Long-Term Capital Management being rescued is high, but the same cannot be said for its shareholders," He Zhengcheng said.
"What you say makes some sense to me," Zhang Zhiyuan smiled.
The capital market is ultimately driven by profit. In fact, if Long-Term Capital Management's leverage hadn't been as high as 50 to 60 times, Russia's default this time wouldn't have had much impact on them. They were not like Soros, who directly held Russian government bonds. This default directly reduced Soros's immediately available funds by 2 billion US dollars. Of course, 2 billion US dollars was not the problem; the problem was that he shook Wall Street's confidence in him at a critical moment.
"Soros said that the 2 billion US dollars was never in his plans, and that if problems arose on Wall Street, Hong Kong would also be affected, and that the current resistance was futile. He also advised the Hong Kong Monetary Authority not to continue making mistakes…" Zhang Zhiyuan said.
"My view on this is that he's reached the end of his rope. The Hang Seng Index has dropped from its 1997 peak to its current level, essentially hitting rock bottom. Soros still wants to suppress it. Does he want HSBC's market value to fall to 10 billion hong kong dollars, or Cheung Kong's market value to fall to 3 billion? I don't believe Wall Street banks will treat Soros kindly. Aren't Wall Street banks worried about Soros incurring massive losses again in Hong Kong? Aren't they worried about the Long-Term Capital Management situation affecting them? What if their money gets stuck in Hong Kong? They've already made a lot of money, so it's better to quit while they're ahead. Therefore, those who bottom-fish in the Hong Kong Stock Market now will most likely make money," He Zhengcheng said.
"If bottom-fishing can make money now, then why should I invest in you?" Zhang Zhiyuan asked.
"We are long-term investors; it will take two or three years to see results. Your current bottom-fishing is a short-term investment, and you might see results in two or three months. But how can these be compared? Bottom-fishing relies on opportunity; we rely on ability," He Zhengcheng replied.
"Your ability? That still needs time to prove," Zhang Zhiyuan said.
"That's why the first batch of investments will have the greatest returns. You can also wait until we prove ourselves before investing; that would be more conservative," He Zhengcheng said.
"You're not going to try to persuade me?" Zhang Zhiyuan asked.
"Why would I? The investment I want isn't something I beg for. I've presented my investment philosophy and my own capabilities. If you recognize them, you'll naturally invest. If not, why waste everyone's time?" He Zhengcheng thought to himself, does a reborn person need to beg? Well, yes, but it's certainly not worth begging now.
"Perhaps I just want to earn more," Zhang Zhiyuan said.
"If I feel like I've earned too little and am unhappy, will I be perfunctory?" He Zhengcheng asked.
"Perhaps, but that's how investing is," Zhang Zhiyuan replied.
"So, I'm not very proactive," He Zhengcheng said.
"Aren't you worried about raising too little investment?" Zhang Zhiyuan asked.
"What can I do? I'm young, and I need time to grow," He Zhengcheng said.
"Haha~~ Let's reintroduce ourselves, I am Zhang Zhiyuan, Executive Director of Goldman Sachs Asia-Pacific!" Zhang Zhiyuan extended his hand again.
"I am He Zhengcheng, General Partner of Shanhai Capital. Mr. Zhang, are you willing to invest in us?" He Zhengcheng was a bit puzzled; this person's decision was too sudden.
"Of course, promising young people like you have always been our investment target," Zhang Zhiyuan said.
"Thank you very much for your trust. Is there a chance for us to deepen our cooperation further?" He Zhengcheng asked.
"Of course, we look forward to cooperating with you," Zhang Zhiyuan replied.
"I look forward to it too!" He Zhengcheng nodded in agreement.
"Come, let me introduce you to a few people," Zhang Zhiyuan pulled He Zhengcheng over to several other idle investors… Throughout the evening, he had in-depth conversations with seven or eight investors. These investors expressed investment interest, but it remained to be seen how many would actually commit funds. To expand its market, Shanhai Capital opted for low management fees, standard profit sharing, and a high proportion of excess profit sharing.
They didn't set the fundraising target too high, only 300 million US dollars. Well, 300 million US dollars was a lot in 1998, and it wasn't guaranteed to be raised. Li Ban Cheng again added another 20 million to his investment, bringing his total to 30 million US dollars. Goldman Sachs said they trusted them, but ultimately only invested 5 million US dollars. However, Zhang Zhiyuan maintained contact with He Zhengcheng, seemingly genuinely optimistic about him.
On Friday, Hang Seng Index futures still failed to hold above 8,000 points and eventually fell. Lenovo's stock trading volume had doubled since yesterday. Today, He Zhengcheng waited by his computer, only to find that the opening price was the highest point. After attempting to buy 500,000 shares, he stopped. Buying such an illiquid stock was truly a pain.
These past few days, the main Hang Seng Index futures contracts were rolling over, so price fluctuations were not significant. However, there would definitely be another market movement by early next month at the latest. If the short sellers, unwilling to admit defeat, didn't make an effort, then there would be no hope. Even if Soros wasn't involved, there would always be stubborn individuals who defied the odds, or those who had lost their bets and were desperate. On Wednesday, many people came to inquire, hoping to get some inside information from them, but alas, there was no such thing.
People signed investment contracts every day. Shanhai Capital raised 100 million US dollars on the first day and was slowly moving towards 200 million, still some distance from its 300 million US dollar target. It seemed that even with superior foresight, very few people were willing to trust them and take a risk.