Perfect World [EN]: Chapter 243

“Okay. I’ll do my best to help too.”

Bumseok looked at Natalie and nodded. LKS Broadcasting had recently transitioned to a full-time broadcasting operation, investing heavily, but still possessed a substantial 1.9 billion Krang [Korean currency]. Furthermore, revenues had significantly increased, with a net monthly income of approximately 300 million Krang. They were also in the process of listing on the stock market, with Wilkins Investment Securities acting as the lead manager, collaborating with the Avend region’s financial authorities. It was indeed reassuring to be a core company within Ilsimhoe [a fictional organization or alliance].

“Good. I’ll explain what you need to do in a bit.”

Lexter, seated to Bumseok’s right, crossed his arms and calmly began to speak.

“Bumseok, shouldn’t we first provide a general overview of the Black Society’s attack strategy?”

Sharing the same sentiment, Bumseok began to explain the situation to everyone.

“The Black Society’s attack methods are currently difficult for us to predict. Therefore, we cannot prepare for every conceivable attack. Consequently, we’ve identified a few of the most probable scenarios and decided to proactively address them. The primary concern is a potential tax audit by the National Tax Service.”

Upon hearing this, the gathered individuals appeared concerned, as if filled with worry. Regardless of their tax compliance, a tax audit was always an unwelcome prospect. The mere presence of a National Tax Service employee could significantly disrupt the company’s atmosphere, and public knowledge of such an audit could damage the company’s reputation. This was especially critical for LKS Broadcasting, as it could jeopardize their ongoing stock market listing.

Natalie grumbled, a hint of annoyance in her voice.

“The Black Society is resorting to such petty tactics. It’s despicable to exploit public officials in this way.”

Sensing the somber mood, Bumseok spoke with a relaxed demeanor.

“But don’t be overly concerned about the tax audit. Since I’m the primary target, the focus will likely be on God’s Knights [Bumseok’s organization]. It probably won’t cause significant harm to the rest of you.”

“But then, Bumseok, you’ll bear the brunt of it.”

“Don’t worry about that either. I’ve already prepared a solution.”

“Really? How?”

“This matter will be handled by Inspector Lexter and Margaret.”

Bumseok then elaborated on the details to everyone. Initially, they struggled to grasp his plan, but upon careful consideration, it seemed like a viable strategy. It was evident that tax officials would be unable to interfere with God’s Knights for the foreseeable future.

“So, you’re planning to stall for time, and if the situation escalates, you’ll eliminate the threat decisively?”

Natalie inquired, and he immediately responded.

“Yeah, roughly.”

“But why stall for time? Why not eliminate them immediately?”

“It’s to buy time to prepare for the full-scale battle that will inevitably follow. We need time right now.”

“Really? What’s the next attack?”

“I can’t say for certain, but I anticipate it will likely be a hostile M&A [Mergers and Acquisitions] attempt on Rainbow Group.”

Gloria, her face paling, quickly interjected.

“R-Really?”

“It’s not certain, but it’s highly probable.”

“T-Then I’m doomed.”

Bumseok looked at her, bewildered. If she believed she was doomed, it implied the situation was dire, which was naturally concerning.

“What do you mean?”

“Our Rainbow Group is extremely vulnerable to a challenge to management control.”

“No. Why?”

“I only own 12% of Rainbow Group’s shares.”

Gloria proceeded to explain. She owned two companies: Rainbow Group and Rainbow Hotel.

Currently, Rainbow Group had issued a total of 120 million shares, priced at 220 Krang per share. Of these, her stake was only 12%, with Rainbow Hotel owning 3%, an employee stock ownership plan holding 4%, a securities company owning 44%, and the public float accounting for 37%.

Rainbow Hotel, on the other hand, had a total of 35 million shares issued, priced at 387 Krang per share. The share distribution was as follows: Gloria at 19%, employee stock ownership plan at 3%, Rainbow Group at 36%, securities company at 17%, and public float at 25%. It was clearly a precarious situation, and if Rainbow Group was targeted, defending it would be extremely difficult. In fact, it wouldn’t be surprising if it were almost immediately taken over.

Bumseok frowned. In reality, owners of large companies often maintained control with significantly smaller stakes, but this was due to established systems. He couldn’t comprehend why she had such a limited stake.

“Gloria, how did you end up with such a small stake?”

“W-Well, it’s because a significant amount of capital was invested in building Rainbow Hotel. And until recently, I had a strong relationship with the financial sector, so there wasn’t much concern about management control.”

Lexter, who had been carefully assessing the situation, spoke up.

“It doesn’t appear to be the worst-case scenario.”

“Even though Gloria only holds 12% of Rainbow Group’s shares?”

“But Rainbow Hotel owns 3% of the shares, and the employee stock ownership plan owns 4%. Since these two are aligned with us, we can safely say we’ve secured a total of 19% of the shares.”

Bumseok was also aware of this. Given Gloria’s control over Rainbow Hotel, the 3% of shares held by Rainbow Hotel were naturally on their side. And considering her close relationship with the company’s employees, the 4% of the employee stock ownership plan could also be considered allies.

The problem was that the securities company shares and public float combined accounted for 81%. And given the securities company’s tendency to prioritize profit, their 44% stake was likely to go to the Black Society. Furthermore, with the Black Society mobilizing vast amounts of capital and connections, the 37% of public float couldn’t be guaranteed either.

“But the remaining shares are unstable. As you know, Inspector, if they acquire more than 50% of the shares, we’re finished.”

“Of course. But fortunately, Rainbow Group holds a 36% stake in Rainbow Hotel. Adding Gloria’s 19% stake, that’s a total of 55%. In other words, we don’t need to worry about Rainbow Hotel at all and can focus solely on Rainbow Group. Do you understand what I mean?”

Leopard, who was standing in front of Lexter, nodded in agreement. He didn’t know much about management, but he had some knowledge of M&A due to his past experience of having his company forcibly taken over.

“Bumseok, Inspector Lexter is right. With our limited capital, it’s difficult to defend management control on both fronts. Since we don’t have to worry about Rainbow Hotel, we can secure a reasonable level of shares with our existing 60-70% of capital.”

Lexter added another point.

“Besides, we have time to prepare, so it’s not a completely hopeless situation. If we steadily buy shares from now on to solidify management control, we might have a chance of winning.”

“That’s true, but…”

Lexter immediately spoke with a concerned tone. Rainbow Group had one significant vulnerability. If the Black Society exploited it, Ilsimhoe would inevitably suffer a substantial financial setback.

“But there’s one major concern.”

“What is it?”

“If the Black Society initiates a bond crisis similar to the one we experienced previously, we’ll be forced to use the funds intended for defending management control to buy bonds.”

Bumseok frowned. The thought that this potential loan could hinder them again was frustrating. Although the market wouldn’t fluctuate as dramatically as it did after the previous internal conflict, it was likely that Unique Bank would release an unlimited quantity of bonds. The amount would be at least several billion Krang, which would significantly deplete their resources.

‘Should I ask Chairman Wilkins for help again?’

However, this situation stemmed from an M&A strategy, so it was questionable whether Wilkins would offer assistance. The previous bond crisis involved such unethical tactics that he couldn’t remain neutral as a financier, but M&A was a legitimate business practice. Even if it was hostile, there was no guarantee that Chairman Wilkins would intervene.

“Then what should we do?”

“Well, I’m not sure either. Let’s start by asking Chairman Wilkins for help, and if that doesn’t work, we’ll explore alternative solutions.”

Bumseok believed this was the best approach and decided to move on to the next topic. Currently, Unique Bank held approximately 6.2 billion Krang worth of Rainbow Group’s bonds. Most of them were 3-year and 5-year bonds, so the monthly payments would be slightly over 150 million. LKS Broadcasting was consistently generating income, so if all else failed, they could cover it with those funds.

He looked at Natalie.

“Natalie, you mentioned that LKS Broadcasting’s monthly income is around 300 million, correct?”

“Yes. Our income has increased by about 50% since we began full-time broadcasting.”

“Good. Then start accumulating as much capital as possible. We don’t know when we’ll need it.”

“Okay.”

“Ah. And you said LKS Broadcasting’s current holdings are 1.9 billion, right?”

“Yes, approximately. But it will increase to about 2.2 billion after the end-of-month settlement.”

With 2.2 billion, they could purchase 10 million shares of Rainbow Group. That was a substantial 8%, which would increase their stake for defending management control to 27%. Then, if they secured another 23-24%, Rainbow Group would be safe.

However, one concern was which shares to acquire with this capital. If 2.2 billion was suddenly injected into the market, the stock price would skyrocket. He believed it was best to avoid purchasing public float through the stock market. The only beneficiary of a rising stock price would be the Black Society, which had significant financial resources.

‘Then it would be more advantageous to buy the securities company’s shares. We can absorb the public float with the funds that come in later.’

The securities company’s stake was likely to fall into the hands of hostile entities. There was no way they would assist Rainbow Group, risking a conflict with the Black Society, which operated on the principle of power. It was better to gradually reduce the securities company’s stake while they had the opportunity.

He posed a question to Gloria.

“Gloria, can you ascertain the securities company’s shareholding status?”

“Yes. Please wait a moment.”

Gloria retrieved her electronic notebook and displayed the data Bumseok had requested on the screen. He tilted his head, examined the contents, and then frowned. Unique Bank, which he had anticipated would be a completely hostile force, held 11% of the shares. This was a ratio equivalent to Gloria’s personal stake.

“Sigh~ Why does Unique Bank have so many shares?”

“W-Well, that’s because Unique Bank was our primary bank until recently…”

“Then you should have reduced it.”

“I was so focused on the debt ratio that I didn’t have time to address it.”

Bumseok sighed deeply and stared blankly at the ceiling. The fact that they had to start with 11% already in the hands of the Black Society made the future appear bleak. But they had time. They could widen the gap in the meantime, so it wasn’t time to lose hope yet.

“Tsk. It can’t be helped. Then go to the securities company and buy shares. Natalie will provide the funds.”

“Yes. I understand. But Bumseok, what about the Remaster Hotel deal? We’ve already discussed obtaining a loan from LHN. Should we cancel it?”

“How much were you planning to borrow?”

“16 billion Krang.”

Bumseok suddenly brightened. If they had that capital, everything would be resolved. With 16 billion, they could purchase 72.72 million shares at the current market price. The stock price would increase if the M&A commenced, so it would be significantly less, but they would still be able to safely exceed the 51% threshold.

“Gloria, can’t we cancel the Remaster Hotel purchase and use those funds to defend management control?”

“No. We agreed to borrow it for the specific purpose of purchasing Remaster Hotel, so we can’t use it for other purposes.”

It was a disappointing response, and Bumseok’s expression was filled with regret. That much capital, 16 billion Krang, would have been invaluable in resolving this situation. But soon, a smile of joy spread across Bumseok’s face. On the right side of the document, Rainbow Group’s income and debt were listed, and their annual net income was only about 720 million Krang, while their debt was 18.5 billion Krang.

As he compared the situation that suddenly came to mind with the anecdotes of the Three Kingdoms [a period in Chinese history known for its strategic battles and political intrigue], a very interesting picture was forming. If they played their cards right, they might be able to give the Black Society a severe blow.

Bumseok quickly looked at Natalie and spoke.

“Natalie, when will LKS Broadcasting be listed?”

“It will probably be soon. Ah! Are you suggesting we use the funds from the listing to buy shares?”

“Well, that’s roughly the idea. But what will be the listing price, and how will it be structured?”

“Well, those details are still under discussion, so you’ll need to speak with someone from Wilkins Investment Securities to get the specifics. Our broadcasting company has a lot of capital, but the number of shares is too small, so we need to drastically increase the number through stock splits or free stock offerings. Otherwise, there won’t be sufficient trading volume in the market, which could cause problems with stock trading.”

Bumseok nodded, recognizing it as a valid point. Currently, he owned 16% of LKS shares, but the number of shares was only 48,000. That meant the total number of shares was 300,000. With this quantity, there wouldn’t be enough trading volume in the market. It was unfavorable in many ways, so it was better to significantly increase the number of shares.

“Really? Then I’ll talk to that person later, so please schedule an appointment.”

“Well, that’s not difficult, so yes, I will.”

Bumseok looked at Gloria with a serious expression. The story he was about to tell was complex and nuanced, so he needed to explain it clearly for her to understand. He continued a close conversation with her in a polite manner.

============================ Author’s Notes ============================

I’m a bit late. I came home late after drinking with someone I know. Hahaha. I didn’t know I would be drinking so late, so I couldn’t make a reservation. Thank you for your understanding.

Then everyone, have a great weekend. I’ll see you again tomorrow.