Darkstone Code-Chapter 955 - 953: Capital Increase and Expansion

After the applause from the people had almost subsided, Lynch raised his hand and gestured for silence, "I have a second announcement to make, we are going to expand our capital."

"We will use the closing price of the last trading day as an important reference. According to evaluations by two consultancy firms in Bupen, the current market value of Every Moment should be between 380 million and 400 million."

"We take the midpoint, which is 390 million."

"All of you are probably well-aware of the recent events in the company. It is precisely because our raw material channels have been restricted by others that, even though we should have a more important position in bilateral transactions, we still lost the initiative."

"To solve this problem, to provide people with more confidence from various aspects, making them believe that we will not fall, capital expansion is inevitable."

"The capital expansion will primarily address the issue of raw material restrictions and establish new research institutes, among others."

"Since Mr. Wardrick and I share the same opinion and our combined shares exceed half, we do not need to discuss and vote on this matter at a shareholders’ meeting to finalize it."

"We initially plan to increase stock worth 390 million, and all shareholders can subscribe according to the proportion of shares they hold."

"These funds will directly flow into the company’s public account and will be subject to supervision by the shareholders’ meeting, the board of directors, and myself."

"If anyone is unwilling to subscribe, it doesn’t matter, the excess shares will be further allocated to willing shareholders until completion."

"We have a week to consider, and after a week, we will announce this matter publicly."

"Do you have any opinions?" Lynch looked at Mr. Wardrick after speaking, and the latter shook his head, expressing agreement with Lynch’s decision.

This change caused many people’s expressions to become very unnatural. To put it simply, this capital expansion means whoever holds how much equity in their hands will have to take out the same amount of money to maintain their voting rights.

Indeed, after the capital expansion, they have more shares in their hands; wealth merely exists in another form—converted from Federation Sol, the specific circulating currency, into company shares, with equivalent value.

But in reality, their voting rights have not changed at all. Someone with one percent voting rights still holds one percent after spending 3.9 million, not turning one percent into two percent because of the expenditure.

This is, indeed, very rogue, and it’s the most direct and effective way for capitalists to devour small and medium enterprises—crushing you with money.

Once start-ups succeed, major and minor shareholders will demand stock issuance and capital expansion, with the purpose of ousting the founders.

The success of start-ups does not mean the founders also have money. Here’s a simple example.

A founder establishes a company with a market value of 100,000.

Several investors invest 900,000 but only acquire 30 percent of the shares, and they require a low share purchase price and the introduction of more funds into the company account as part of the investment terms.

Many founders don’t mind this; to them, money entering the company account is equivalent to entering their pockets because they always hold the most shares.

Now, the company’s market value is one million, with the founder holding 70 percent of the shares and investors holding 30 percent.

At this time, the start-up succeeds, and the company’s market value increases to ten million; the shares in the founder’s hands remain unchanged, meaning he is worth seven million.

But at this time, investors demand capital expansion, generally as stipulated or agreed upon in the initial investment contract.

They invest a staggering 100 million all at once.

Now, the founder’s "seven million" is essentially just the value of the shares he holds, and he cannot produce more money to continue investing.

His shares have been diluted from 70 percent to six percent, barely qualifying him to even attend the shareholders’ meeting, only eligible to sit in.

Naturally, whatever he says is useless for the company; those investors can easily decide who becomes the president, even deciding if the founder’s shares have voting rights.

They can even use some legal or illegal means to force the founder to sell his stock!

If the founder keeps up? Then to maintain his shareholding unchanged, he must come up with at least 230 million in additional funds, ensuring his shares aren’t diluted.

Even if he can manage one round, what about the second round?

The third round?

By the time he is kicked out of the board and only eligible to sit in at the shareholders’ meeting, investors with a few simple means can transfer funds while maintaining unchanged shares.

Such is the current situation; Lynch has placed his bet, and others, if unwilling to see their voting rights shrink, must match.

In total, they need to gather 390 million to ensure their rights remain unchanged.

But... what about next time?

Or the time after that?

The expressions of all shareholders changed, including the manager of Rongsheng Gold Bank.

He initially thought that when the company was being acquired, even Lynch should focus on defense—such as using funds to bid against other malicious acquirers to buy back shares from the shareholders.

Unexpectedly, he turned around and decided to expand the capital, forcing those acquirers to have to match.

If they don’t follow, their early investments, the large sums of money, effort, and favors spent on acquiring shares, will immediately shrink by half!

If they want to follow, for the nearly thirty percent of shares converting from non-circulating to circulating, they would need to come up with over a hundred million to maintain their position.

And what Lynch does is essentially to put up about that much money.

This is a classic example of using one’s ample wealth to outspend others!

What’s more irresistible is that Lynch and Mr. Wardrick hold more than half the shares, allowing them to make decisions without shareholder meeting approval, leaving no room for opposition!

For a while, the meeting room fell silent, as everyone pondered the issue of gains and losses.

Subsequently, Lynch announced some of the company’s new plans and directions, including solutions to the tobacco leaf problem.

Every Moment will use "Black Gold" tobacco leaves from Nagariel as its main raw material in the future and informed everyone that the company has already signed a twenty-year supply contract with an agricultural company in Nagariel.

All their tobacco leaves are exclusively for Every Moment’s needs, not for external sale, and at a low cost...

After the meeting ended, Lynch did not rush back but instead called the shareholders of Future Light Investment Company one by one to inform them of a meeting tomorrow.

This is also expected.

Lynch’s private share expansion is his own business, but if Future Light Investment Company wants to follow, they also need to pay up.

Business is business, private is private, the excuses of a capitalist are damn convenient.

In the evening, Lynch and Mr. Wardrick, along with Severa, sat together as Mr. Wardrick invited Lynch to dinner.

Don’t be fooled thinking Lynch actively brought this five percent of shares to Mr. Wardrick, in reality, without Lynch, Mr. Wardrick would have to put in some effort to acquire these shares.

Moreover, these shares did not actually end up in Mr. Wardrick’s hands. Lynch played a little trick, he used some wordplay.

In truth, Mr. Wardrick holds only 0.1% of the shares, while the remaining 4.9% is in Severa’s hands, which can be considered a small gift from Mr. Wardrick to his daughter.

It’s infuriating, when can ordinary families have such small gifts too?

Enjoying the expensive dinner, the atmosphere was harmonious.

Severa set down her wine glass and softly asked, "What do you plan to do next?"

"Kick those who don’t belong at Every Moment out of the game, then re-list on the market."

As Lynch finished speaking, a look of admiration appeared in Mr. Wardrick’s eyes.

He thought Lynch would say something else, but unexpectedly, Lynch got straight to the point about re-listing, proving that Lynch hasn’t changed, still the crafty little fox.

When Mr. Wardrick was younger, he once owned a private enterprise, and at that time, he thought it was the best thing.

He ruled like a monarch in the company, and no one could oppose his demands, even if they knew his demands were wrong, they would still comply.

He was the only king in the company, and no one could defy him.

That feeling... was unforgettable, but it wasn’t the right way. Later, his company was hit, and his family did not support him until he had to agree to other investors buying shares, then his family stepped in to help him.

This made him understand that, no matter how strong a person is, if they don’t want to be rejected by society, it’s best to follow society’s rules.

It restricts the strong and protects the weak, and in the reverse, it is also a protection for the strong, to prevent them from being devoured by collectively gathered weak.

Of course, this premise is that you have enough capability.

He thought Lynch would be indulged in the power he held, but now it seems he is very clear-headed.

Once Every Moment is re-listed, the stock price will surely soar, even exceeding its previous peak, and this is the reason for "capital correctness", everyone wants to make money, and you must let those qualified to participate make money.

Severa wasn’t as sentimental, she was a bit incredulous, "Is it really that simple?"

Lynch nodded, "So what do you think, how hard should it be, or what else should I do?"

Severa didn’t continue talking, she just carefully savored the content of her conversation with Lynch and Mr. Wardrick.

She began gradually engaging in business matters, after all, Mr. Wardrick will grow older, he cannot always make decisions himself, he needs someone to take over his work, and his daughter is the best candidate.

Watching his daughter grow with each event, Mr. Wardrick felt a bit sentimental.

The Lord didn’t give him a boy, but He gave him a clever girl.

-====

In reality, financing comes with many terms and restrictions, even many betting agreements, the situation is very complex, the examples here are purely hypothetical, and have no actual value.