American History 1988
Chapter 221 - 215 Double-barreled Approach

Chapter 221: Chapter 215 Double-barreled Approach

The assessment report on Wall Street and the front-page news about AT&T and IP telephony were all deliberately leaked by Byte Company.

They were preparing for their IPO and, of course, wanted to ensure Byte Company appeared on Wall Street’s radar.

Mary Mikel wanted to write an analytical report on Silicon Valley’s software industry, and just then Byte Company stepped through the door.

With Dean’s intentional cooperation, she obtained a lot of "inside" information.

Of course, to attract the experienced Wall Street elites, Dean needed to throw out a lot of new concepts.

It turned out that Mary Mikel, the young analyst, quite liked these "unorthodox" pieces of information.

She needed something eye-catching, and the assessment report on Byte Company was the perfect lead-in.

This resulted in the meticulously crafted industry analysis report in The Wall Street Journal.

As for the front-page news on AT&T and the IP telephone business—it was the US Dollar and its disruptive nature that were at play.

Getting on the front page undoubtedly required a bit of PR spending.

But Byte Company hesitated not at all to write the check, even though the PR cost was close to 700,000 US dollars, about ten times more than for other newspapers.

However, just these were not enough; to take over the front page of The Wall Street Journal, its news value had to be considerable.

IP telephone business securing orders worth 40 million US dollars in its first month—how about that for newsworthy?

Count it! Of course, it’s substantial! Most importantly, it happened at AT&T’s headquarters, in the southern states like Texas.

Additionally, this represented a new communication technology challenging the traditional telephone market.

An entity as new and fragile as a newborn, yet with a sharpness and an endless potential.

An incumbent that had dominated the communication market for nearly a century, monopolizing about 80% of the nation’s landline telephone market.

The clash between them should have been a foregone conclusion, but reality dropped jaws all around.

million US dollars! Good heavens, people who saw the news thought the editors at The Wall Street Journal were drunk while reviewing the piece.

But they knew that couldn’t be true, and it was this very improbability that lent the story its impact.

A new telecommunications service company, alright, albeit one backed by the established powers MCI and the increasingly popular Byte Company.

To snatch a piece of the pie right from under AT&T’s nose still left everyone astonished, and also filled them with wonder about World Link.

Could this be yet another David versus Goliath story?

However it was, many on Wall Street saw the potential in World Link.

Previously, they hadn’t even heard of it, but 40 million US dollars, garnered in just one morning, made Wall Street take note of it.

This was just the first month, and it was hard to imagine what World Link would become in six months, or a year’s time.

So the managerial staff in luxurious Manhattan offices, suited in their fine clothing, began making calls to gather all the information they could about World Link.

They pulled up past news reports from when World Link was established last year and learned of Byte Company’s IP telephone technology.

Alright, things had become very clear now, and by the afternoon, Byte Company had received countless inquiry calls.

Some were from investment institutions, others from individual investors, all without exception showing great interest in Byte Company.

There was nothing they could do about MCI; it was already considered a titan.

But Byte Company’s emergence was perfectly timed, possessing that mesmerizing IP telephone technology, and they were seeking an IPO.

Look, isn’t this what Wall Street does best?

"1.1 billion dollars, yes, Mr. Cooper, that’s the latest bid we’ve just received... OK, we’ll stay in touch,"

Ending the call, Dean, feeling pleased, pushed off from the floor and let his chair spin once around in front of the blinds.

Less than three days since Morgan Stanley’s people had visited, Byte Company’s valuation had already soared by a billion dollars.

The recent call had been from Goldman Sachs, willing to underwrite Byte Company’s stock at a valuation of 1.1 billion dollars.

Clearly, Dean’s two-pronged PR approach had worked.

Mary Mikel’s report strategically affirmed the prospects of Byte Company.

The front-page news about IP telephony, on the other hand, indirectly proved that Byte Company’s value had been greatly underestimated.

Although it only held a 35% stake in World Link, the latter’s market was boundlessly vast.

In the eyes of East Coast old money, the telephone business was much more reliable than the software business.

Yes, Goldman Sachs’ willingness to underwrite Byte Company’s stock was not due to its impressive software business.

Instead, Goldman Sachs’ clients were greatly interested in World Link, but with MCI out of reach, they turned their attention to Byte Company.

The situation was somewhat ironic, but the end result was the same.

The readers of The Wall Street Journal, apart from the various investment institutions, include wealthy elite families.

Their annual income averages over 150,000 US dollars, ranking them in the top 30% of America’s social demographic.

They have investment needs, hence, they’re part of The Wall Street Journal’s readership.

Following the publication of these two articles, nearly every investment bank, big and small on Wall Street, received calls from this elite demographic.

Their question was singular—how could they purchase shares in Byte Company?

When the customers have needs, the market provides immediate feedback, as the recent call demonstrated.

But were these all the moves Byte Company had to play?

Dean flipped through the calendar on his desk; it was already mid-May.

Counting the time to confirm underwriters, as well as subsequent applications to the SEC, followed by the roadshow pricing,

this process might take two to three months, so it was time to roll out Byte Company’s final publicity move.

Dean picked up the phone on his desk, "Los, send out our financial report from last quarter, the time has come."

"Got it, Boss. We’ve had the template ready for a while now," the excited voice of Chief Financial Officer Los came through the phone.

Byte Company hadn’t gone public yet, so it wasn’t obliged to disclose its financial reports.

But since there were good results to show, why not flex its muscles to complement the upcoming IPO?

With a two-pronged approach, and now a financial statement that’s almost an open hand, Dean didn’t believe Byte’s IPO wouldn’t attract Wall Street’s covetous glances.

Ring ring ring...

As he considered the next steps, the phone on his desk rang again.

"Byte Company, Dean Price speaking."

"Dean, it’s me, Richard from Morgan Stanley."

There it was, Dean’s eyes lit up, "I’m delighted to hear from you again, Mr. Fisher."

"I saw today’s Wall Street Journal," Richard got right to the point, "perhaps we should have another talk about Byte Company’s IPO?"

"Of course, I’ve been looking forward to this moment," Dean leaned back in his chair, much more composed now, waiting for the other party to make an offer.

"1.2 billion US dollars, I think that’s what Byte Company is worth. Of course, regarding the funds raised through the listing, we need to discuss further.

As long as the proportion is right, Morgan Stanley can find block buyers interested in purchasing for Byte Company."

Under the influence of two pieces of news and after consulting their clients about their purchase intentions, Richard made a new round of offers.

The IPO valuation isn’t decided by Byte Company alone, nor by Morgan Stanley alone.

It largely depends on the market.

In other words, whether Morgan Stanley can find clients willing to buy Byte stock at that valuation.

Of course, the amount of funds Byte Company is preparing to raise, that is, the financing ratio for the listing,

These are the specific numbers in public trading, determining whether Morgan Stanley’s clients are willing to pay for them.

Byte Company, Morgan Stanley, investment funds, financing ratio are the key elements in the listing process.

They correspond to the listing company, underwriting firm, primary market clients, and the transaction amount—these factors.

Only by properly managing these can Byte Company’s listing be deemed successful.

Now that Richard had offered Dean a valuation of 1.2 billion US dollars, it meant that Morgan Stanley had considerable confidence.

But unfortunately for Richard, his call was a bit premature, "Mr. Fisher, I suggest you wait a bit longer."

"Dean, this is Morgan Stanley’s biggest concession. We can guarantee Byte Company a successful listing,"

Richard warned Dean, he could understand the latter’s behavior, but that did not mean Byte Company could afford to take Morgan Stanley lightly.

"No, you’ve misunderstood me, Mr. Fisher," Dean gestured for him to not be hasty, "Byte is going to release its latest quarterly financial report tomorrow.

Isn’t it a great opportunity for Morgan Stanley to get a clearer picture of us?"

Compared to various analyses of market potential, financial reports are more direct and convincing.

"OK, I’ll call you again tomorrow," Richard paused a moment, "Dean, Morgan Stanley is approaching this transaction with the utmost sincerity."

"Of course, Byte Company also greatly values the first person to make us an offer."

Dean hung up the phone with a light chuckle. Business was business, and haggling was fundamental.

Is a good underwriter important for an IPO? Absolutely.

But Byte is also their client, and Morgan Stanley will earn a substantial commission from the IPO process.

Therefore, selling Byte’s stock to other institutions is part of the underwriter’s duty.

Dean needed to apply some pressure on them, especially since Wall Street was currently very optimistic about Byte’s future growth potential.

1.2 billion dollars was already a 20% increase over Morgan Stanley’s offer from a few days ago.

But Dean felt that was not yet the limit; it could still go higher.

After all, judging solely on the potential of World Link, its valuation alone might be worth several hundred million.

Though Byte Company only held a 35% equity stake, the market was big enough, and it was still a tempting piece of the pie.

Including it in Byte’s valuation, was a 200 million dollar increase on a base of 1 billion dollars too high?

No, Dean thought it was reasonable.

And with the news continuing to develop, the East Coast was willing to offer an even higher stock price for the IP telephony market.

It must be said that World Link could open up the market so rapidly not just because of its various advantages and extremely low costs,

but also because MCI opened up the doors of convenience, which was one of the decisive factors. Without the latter’s nationwide telephone network lines,

World Link would have had a hard time opening channels and connecting customers to the vast telephone network in such a short amount of time.

Affordable prices, relatively complete basic services, and broad coverage are just some of the factors of success.

Of course, World Link was not without limitations at present, and this problem might very well come from within.

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