The Conglomerate Family Became A Villain [EN]: Chapter 212

212. The World’s Rift (1)

In 1985, the U.S. economy wasn’t strong enough to justify the Plaza Accord [an agreement between France, Germany, Japan, the United States, and the United Kingdom to depreciate the U.S. dollar in relation to the Japanese yen and German Deutsche Mark].

However, the U.S. stock market presented a different picture.

Anticipating action from the Reagan administration, the S&P 500 index experienced a boom, surging by 26%.

For context, the Magellan Fund, under Peter Lynch, further cemented its legendary status on Wall Street, achieving a 43% return, nearly double the index’s performance.

April 1986.

Victoria Corporation was added to the S&P 500 index, and its stock price exceeded $30, surprising everyone.

Victoria Corporation’s stock price on JP Services [likely a brokerage or financial platform] reached $30.8.

“This feels a bit like a bubble.”

The one voicing concerns about Victoria Corporation’s stock price being a bubble was none other than Jung Hyun-woo.

Victoria Corporation’s stock price was climbing so rapidly that even the company’s owner considered it unsustainable.

“So, are you thinking of selling?”

Selling when a stock price peaks is a fundamental investment principle.

“No.”

“Then it shouldn’t matter, right?”

Jung Hyun-woo clicked his tongue and responded to Sarah.

“If a bubble inflates in the company’s stock price, investors are inevitably going to be disappointed.”

Sarah replied with a slightly cool tone.

“Charlie, not everyone can win in the stock market.”

The reality is that one person’s loss is another’s gain.

“Still, I don’t think bubbles are healthy. It makes the company feel unstable.”

Sarah knew that Jung Hyun-woo was a straightforward investor.

‘Charlie doesn’t like pretense or exaggeration.’

She appreciated this quality in Jung Hyun-woo.

“Should we issue a warning about the rapid increase?”

Jung Hyun-woo paused to consider her question before answering.

“Hmm. We’re not an investment firm, and I don’t think we need to go that far.”

He disliked the bubble, but not enough to warrant a direct public statement.

“Then let’s just move on. It’ll probably subside soon.”

Sarah anticipated that the stock price might correct itself after the first-quarter earnings announcement.

“The earnings announcement is next week, right?”

Jung Hyun-woo confirmed the earnings announcement date, sharing her expectation.

“That’s right.”

“I think there will be an adjustment after the earnings announcement.”

“Probably.”

Both believed that Victoria Corporation’s first-quarter earnings, while positive, wouldn’t justify a stock price of $30.

‘If the stock price is $30, the market capitalization is $60 billion. That’s larger than Bank of America or Citibank.’

He estimated Victoria Corporation’s fair stock price to be between $20 and $25.

However, Victoria Corporation’s stock price was exceeding $30, and climbing towards $35.

The next day.

Jung Hyun-woo and Sarah were featured on the cover of Fortune magazine.

Robert held up the Fortune magazine with their picture and exclaimed.

“Wow! You two are amazing.”

Jung Hyun-woo shrugged.

“Robert, don’t tease me.”

“I’m not teasing. Who would have thought our company’s CEO would grace the cover of Fortune?”

Sarah’s reaction mirrored Jung Hyun-woo’s.

“Robert, it’s not like we’re on there for a good reason.”

Robert put down the Fortune magazine and said.

“It’s an article about emerging wealthy people in 1986, isn’t that a good thing?”

“It feels like we’re in the middle of a bubble.”

The reason Jung Hyun-woo and Sarah were wary of the bubble was that they had witnessed one before.

Robert understood their apprehension.

“Charlie, Sarah. We won’t become like Atari.”

The Atari shock [the video game crash of 1983, triggered by Atari’s overproduction and poor quality games].

The massive bubble created by Atari devastated the North American game industry almost overnight.

The two feared that Victoria Corporation’s bubble could lead to a similar outcome.

Jung Hyun-woo responded with a somber tone.

“You never know.”

Robert’s smile faded, and he lowered his voice.

“Charlie, a crisis doesn’t strike those who are cautious. A crisis strikes those who are arrogant and overconfident.”

He served as a pillar of stability for Victoria Corporation.

Sarah interjected, asking.

“Robert, what’s the employees’ reaction?”

“Most of them probably don’t care.”

Sarah bit her lip at his response.

“They may seem indifferent on the surface, but not on the inside.”

Robert turned to Sarah, questioning.

“Why do you think so, Sarah?”

Sarah responded with a question.

“Robert, what were you thinking when Atari’s bubble was growing? Weren’t you thinking that the executives were making a fortune, while the developers weren’t being fairly compensated?”

Robert scratched his head, acknowledging her point.

“Well, I can’t deny that.”

He had been disillusioned by Atari’s unfair practices, resigned, and founded Activision.

Jung Hyun-woo sighed softly.

“Hoo… These kinds of articles aren’t good for employee morale. There’s a saying in my country: ‘Even if you show off your wealth after preparing a feast, you’ll still be criticized.'”

Of course, no such saying existed in Korea.

What he told Robert was something a senior colleague who had won second prize in the lottery had said when he was working at a game company.

Robert didn’t know the origin of the saying, but he understood Jung Hyun-woo’s meaning.

“Does that mean we should throw a bonus party?”

Jung Hyun-woo nodded.

“Otherwise, morale will plummet.”

“Charlie, that doesn’t make sense. Didn’t you just say that even if you throw a feast, you’ll still be criticized?”

He thought it would be better not to throw a feast since they were going to face criticism regardless.

“Robert, what do you think will happen if you get criticized even if you throw a feast, but you don’t even throw a feast?”

“Are you saying that employee morale will drop significantly?”

Jung Hyun-woo nodded.

“We should offer stock options.”

Sarah raised her hand, stopping his stock option proposal.

“Charlie, I don’t think adding stock options is a good idea.”

Jung Hyun-woo turned to her, asking.

“Why?”

“Stock options can boost employee morale, but they will create distrust among investors.”

Since it was a publicly traded company, they had to consider the shareholders.

Robert listened to their discussion and leaned back in his chair.

“Hoo… It’s a no-win situation.”

A dilemma.

Others might have celebrated the increased market capitalization and assets, but Jung Hyun-woo and Sarah were not like that.

Robert leaned back in his chair and thought.

‘That’s why these two have come so far.’

Without being complacent about success, no, without being intoxicated by success, the two always tried to remain calm.

‘I may be older, but I can’t match those qualities of theirs.’

Robert hadn’t brought the Fortune magazine to mock Jung Hyun-woo and Sarah.

He had brought the Fortune magazine as a lighthearted joke before the meeting started.

However, even that lighthearted joke didn’t resonate with them.

“It’s a situation where we can’t do either.”

Sarah slammed the desk with both hands and said.

“Let’s wait and see.”

The plan was to observe the situation before taking any action.

Jung Hyun-woo agreed with her opinion.

“Let’s do that.”

There would be no end if they responded to every single article.

‘Of course, we need to be mindful of the drop in employee morale.’

Treating employees like servants was only possible in developing countries.

This was America, and American talent could leave the company at any time, just as Robert had left Atari to found Activision.

* * *

April 22nd.

New York, Victoria Corporation headquarters.

Sarah walked onto the stage wearing a red dress. Reporters continuously snapped photos of her and her glamorous attire.

Click. Click. Click.

Watching the scene, someone standing in the back muttered.

“It’s like being in Hollywood.”

The scene was more reminiscent of Hollywood than Wall Street.

However, Sarah’s red dress was not simply for show.

Her red dress conveyed multiple meanings.

Soon, observers began to interpret the symbolism of her red dress.

“Hmm, a deep red color. It seems to suggest that Victoria Corporation’s earnings for this quarter are strong.”

“You’re interpreting the dress color like that?”

“Usually, you don’t wear a red dress for corporate earnings announcements.”

“Well, usually, they wear plain colors.”

Those who were perceptive quickly offered various interpretations of her red dress.

“It’s not just about corporate earnings. Red also carries a warning.”

“Warning?”

“Isn’t the red dress she’s wearing today meant to warn that Victoria Corporation’s stock price is in a bubble?”

“Wow. Isn’t that a stretch? There’s no way Miss Hilton would think that deeply.”

“Don’t underestimate Miss Hilton. She and Charlie Jung have been making impressive moves for the past few years.”

Opinions were divided among the reporters.

Sarah began the earnings announcement.

“Thank you for waiting. I will now announce Victoria Corporation’s first-quarter earnings.”

She mechanically presented Victoria Corporation’s earnings for about 3 minutes.

Victoria Corporation’s earnings were as strong as expected.

“Ummm, does that mean sales increased by more than 30% compared to the first quarter of last year, and net profit increased by 22%?”

“Guidance is also rising, and the indicators are definitely positive.”

“Even so, a stock price of over $30 is excessive.”

“Are you suggesting there will be a correction?”

“Probably, wouldn’t you think?”

Since the stock market was closed today, there was no stock price fluctuation during the earnings announcement.

However, many people anticipated a correction for Victoria Corporation.

“Victoria Corporation’s net assets have increased by more than 80% compared to the previous quarter.”

The reporters tilted their heads at her announcement.

“Huh? I understand that net profit has increased and sales have risen, but net assets have increased abnormally.”

“If it was just assets, I would assume they took out a loan… Aren’t net assets derived from net profit?”

As the reporters raised questions, Sarah addressed their curiosity.

“Victoria Corporation’s assets were able to increase thanks to the recent high returns of the Victoria Fund.”

The Victoria Fund was an investment corporation in which Victoria Corporation was the major shareholder.

However, Victoria Corporation’s stake did not exceed 50%, so it was not classified as a subsidiary.

“Well, we can’t separate the Victoria Fund and Victoria Corporation.”

“Victoria Corporation owns 30% of the Victoria Fund’s shares, and the two CEOs of Victoria Corporation own 60% of the shares.”

Reporters, as well as investors, focused on the Victoria Fund’s profits.

“Maybe this is more important than Victoria Corporation’s indicators.”

“You mean the Japanese investment?”

“Yes, if the Japanese investment went as well as rumored, it could surpass $30 and head towards $40.”

“I wonder how much the first-quarter earnings were.”

The reporters’ gazes were fixed on Sarah.

Sarah paused briefly and calmly announced the Victoria Fund’s earnings.

“The Victoria Fund’s first-quarter profit is $700 million.”

A quarterly profit of $700 million.

This meant that the annual profit was over $3 billion.

“No way.”

People nodded in agreement with the exclamation.

“An annual profit of $3 billion is comparable to Bank of America.”

Even a large financial company like Bank of America needed more than $100 billion in loans to earn an annual profit of $3 billion.

“Moreover, that return is twice the return of the Magellan Fund.”

Simply put, a fund that generates approximately twice as much profit as the legendary Magellan Fund on Wall Street had emerged.

“Could it be a bluff?”

Even as Sarah explained the details, the reporters remained skeptical.

“It’s possible.”

“Maybe the financial authorities will investigate.”

Sarah slightly tempered expectations, stating that the previously announced profit was not yet finalized.

“You mean it hasn’t been cashed out yet.”

“It’s still being invested.”

“Then shouldn’t you call it a profit?”

“That would be difficult, because it’s reflected in the indicators.”

Sarah announced that the biggest contributor to the Victoria Fund’s profit was the strong yen.

The reporters nodded at her announcement.

“Certainly, the recent strong yen is remarkable.”

“The mark is also strong, but the yen’s momentum is terrifying.”

“In the end, I think it means the Japanese investment was successful.”

The yen was rising, defying market predictions of an imminent correction.

“I think it’s a mirage.”

Some reporters were pessimistic about the Victoria Fund’s performance.

“You’re saying that performance is a mirage?”

“It’s a profit that vanishes the moment the strong yen reverses.”

As he said, the moment the strong yen reversed, Victoria Corporation’s profit could turn into a loss.

“It means we have to wait and see.”

“There aren’t many cases where you profit from things like exchange gains.”

Sarah continued to announce Victoria Corporation’s new product sales and next quarter’s forecast.

This time, the performance exceeded the reporters’ expectations.

“Oh, the game business is also thriving.”

“If you consider that part alone, it would easily exceed $2 billion, right?”

“It’s all thanks to Nintendo.”

Victoria Corporation’s game division was breaking monthly sales records with the success of G-Shop.

“Okay, okay. Next is Dell Computer.”

Victoria Corporation was also a major shareholder of Dell Computer.

“Now that Dell Computer has been mentioned, it seems like she’s wrapping up.”

As the reporters anticipated, Sarah intended to conclude the earnings announcement with Dell Computer and Microsoft’s collaboration.

“Everyone. Victoria Corporation will strive to deliver positive results in the next quarter as well.”

As she left the stage, the reporters rushed out like a receding tide, eager to send their articles to their respective news outlets.

The next day.

Jung Hyun-woo, Sarah, and Robert gathered in the conference room at 8:30 in the morning.

“Even Robert is here?”

Robert shrugged and replied.

“I’m also curious about how the stock market will react this morning.”

If a regular employee were checking the stock price during work hours, they would likely face reprimand from their boss.

However, the three were the leaders of Victoria Corporation. For them, Victoria Corporation’s stock price was a crucial indicator.

“It’ll probably drop 2 or 3%, right?”

Robert sighed at Sarah’s question.

“Hoo… If it drops 2 or 3%, that means we’ll lose 20 million to 30 million dollars when the market opens today.”

Sarah responded with a cool tone.

“If it’s 20 million dollars for Robert, it’s 200 million dollars for me.”

In Jung Hyun-woo’s case, he was expected to lose 500 million dollars, not 200 million dollars.

Of course, he didn’t dwell on that.

“You two, since when have you been so concerned about our company’s stock price?”

Sarah waved her hand at Jung Hyun-woo’s question.

“Charlie, I’m just kidding. I’m not planning to sell anyway.”

Robert also offered an awkward smile.

“I was just trying to ease the tension before the market opened.”

Jung Hyun-woo turned his attention to the monitor.

“Sarah, Robert. Now is the time for a correction.”

Regardless of the potential decrease in assets, he believed that Victoria Corporation’s stock price should fall below $30.

‘What I want is not a bubble.’

Jung Hyun-woo’s assets had exceeded $30 billion due to the sharp rise in Victoria Corporation’s stock price.

Currently, he was ranked 7th on the list of American billionaires, surpassing Arthur Morgan, the largest shareholder of JP Morgan.

‘I’m the 7th richest man in America.’

It felt surreal.

“It’s starting.”

With Jung Hyun-woo’s signal, the stock market opened.

“Huh? It’s rising?”

The moment Robert blinked, Victoria Corporation’s stock price surpassed $31.

‘Why is it rising?’

Even Jung Hyun-woo couldn’t comprehend the increase.

Sarah was equally shocked.

“$31.2… $31.3, it keeps rising.”

Victoria Corporation’s earnings announced yesterday were positive, but not enough to justify a market capitalization of $60 billion.

That’s why the three had anticipated a correction. But the market was behaving irrationally.

“It’s impossible to predict stocks.”

Just as Jung Hyun-woo leaned back in his chair.

Knock. Knock.

Someone knocked on the door from outside the conference room.

“Come in.”

The person who entered was Jung Hyun-woo’s secretary, Luna.

“It’s a call from Mr. Fear.”

Jung Hyun-woo quickly stood up.

‘A call from Mr. Fear? Did he call because the stock price rose today?’

He excused himself to Sarah and Robert and headed to the president’s office to take the call.