American History 1988
Chapter 225 - 219 Coveting

Chapter 225: Chapter 219 Coveting

"Wait, Mr. Kennedy..." Dean was a bit slow to respond, "Are you suggesting introducing an underwriter for Byte Company’s IPO?"

"Yes, they have called you, but you didn’t respond to them."

"So, which investment bank is it?" Dean had received too many such calls recently; he couldn’t remember which Wall Street institution it was.

"Merrill Lynch," Anthony Kennedy gave out the definite name.

"Merrill Lynch?" Dean looked somewhat enlightened, as it was one of the Big Four investment banks, and he had some impression of them.

The firm had called him these past days as well, proposing to structure the offering strategy based on a valuation of 1.2 billion US Dollars.

This figure had no advantage over Morgan Stanley’s quote, so Dean had given them the cold shoulder.

Only, he hadn’t expected that Merrill Lynch would find their way to Anthony Kennedy, and Dean was somewhat puzzled: How did these two unrelated parties come together?

"Mr. Kennedy, because Byte Company has already reached a verbal agreement with Morgan Stanley.

So I need to know, is Merrill Lynch important to us? This will determine the extent of Byte Company’s cooperation with them."

Since Merrill Lynch had reached out to Anthony Kennedy, there must be some invisible tie between them.

The strength of this network would indirectly affect Dean’s attitude towards Merrill Lynch.

If it were just a simple message-passing, Dean would likely do them a favor, but not let them participate in the core transaction.

On the other hand, if Merrill Lynch had a strong alliance with Anthony Kennedy, Dean would have to consider the combination of underwriters.

A company going public won’t have just one underwriter; typically, it’s an alliance put together by three to four investment banks that jointly underwrite the shares of the company going public.

The purpose of this is to spread the risk, as underwriting is high risk and a single investment bank could hardly bear the loss should the IPO fail.

However, among these underwriters, there would be a lead underwriter responsible for the establishment of the prospectus for the company going public and various procedural issues.

Accordingly, because it takes on more obligations, the lead underwriter also gets the largest share of underwritten stocks.

Furthermore, this underwriting syndicate is typically initiated and organized by the lead underwriter, and they will also have further underwriting agreements among themselves.

Now, based on the progress of the negotiations between Byte Company and Morgan Stanley, the latter is very likely to become the lead underwriter for this IPO.

However, now that Anthony Kennedy is passing messages for Merrill Lynch, Dean might need to reconsider this issue.

Of course, for Byte Company, pricing is everything.

"Dean, have you ever heard of another nickname for Merrill Lynch?" Anthony Kennedy certainly had connections with this Wall Street investment bank.

"Another nickname?" Dean asked with some surprise; honestly, his understanding of Wall Street was limited.

"Merrill Lynch is known among Wall Street and outsiders as the ’Irish Catholic Firm’."

That was the reason for Anthony Kennedy’s call to Dean; the Irish-American community is ubiquitous in America.

Hearing this name, Dean could roughly guess the situation.

"Are they also ’our people’?"

"80% of the senior executives at Merrill Lynch are of Irish descent, you know what that means, Dean."

Anthony Kennedy explained everything with data; this was no secret on Wall Street.

"They never mentioned that, and we hardly talked at all." Dean couldn’t even recall what he had said to the people from Merrill Lynch.

"Because you didn’t give them a chance," Kennedy said with a hint of resignation.

Merrill’s people hadn’t had a chance to converse thoroughly before Dean found an excuse to hang up the call.

Now they had no choice but to contact Dean through Anthony Kennedy’s connection.

Because the people at Merrill Lynch knew the two of them both came from Stanford University and had seen a photo of them together in the newspaper.

The most important factor was the organization of the Irish-American community, which exceeded common imagination.

"Fine, what are their terms?" In business, Dean needed to look out for Byte Company’s interests.

"You negotiate that yourselves, I’m just responsible for introducing you," Anthony Kennedy, shrewd as he was, wouldn’t get involved in matters beyond his own interests.

Although the Irish are united, there’s no logic in coercion.

He was just delivering a message; if the deal came through, both parties would be somewhat indebted to him.

If the deal failed, then it had nothing to do with him, Kennedy.

Of course, deep down, Kennedy hoped that the Irish would help each other and then collectively reap greater benefits.

"I’ll contact them," Dean gave his promise.

"Good, I’ll express Daniel’s gratitude to you on his behalf," Kennedy said, pleased, and hung up the phone.

Dean raised his eyebrows noncommittally and put away his Motorola.

"Dean, who was that?" David Morgentaler, who had noticed the conversation, asked with concern.

"Someone from Merrill Lynch, I told them to get in touch with Morgan Stanley." Dean didn’t elaborate; he preferred not to explain too much.

"Wow, it looks like our valuation can almost be confirmed," Valentine said with pride, puffing a great cloud of smoke from his cigar into the air.

With so many renowned investment banks coming to them, Byte Company’s shares were sure to sell well.

"Yeah," Dean laughed, waving away the drifting smoke, "We wait for the good news from Morgan Stanley."

For Dean, as long as the price was right, he didn’t mind bringing Merrill Lynch into this IPO transaction.

He was still in shallow waters; he needed to unite more allies.

Clearly, Merrill Lynch, dubbed the "Irish Catholic company," was a favorable target—they were natural allies.

Furthermore, as he became more involved in America’s economic activities, he needed his own connections on Wall Street.

Morgan Stanley was one layer; Merrill Lynch might be an even deeper one.

Well, after this IPO, Dean had probably completed the initial layout of his network.

Over at the White House, there was our Governor of Arkansas; at the Federal Supreme Court, there was Anthony Kennedy.

On Wall Street, there was Merrill Lynch, now preparing to collaborate, and in Silicon Valley, there were even more business allies, with Stanford alumni everywhere.

Look at the people in this room, reveling; they were all Dean’s close partners.

But seeing everyone’s joyous faces, Dean, too, smiled happily.

A US$1.66 billion valuation for the IPO; he had nothing to complain about.

It had far exceeded everyone’s expectations, including Dean’s own.

In Silicon Valley, or in the whole of America, there were few companies that went public with a valuation of US$1.6 billion.

Ford Motor Company in the ’60s was one; Apple in the ’80s was the second.

Now, in the ’90s, Byte Company would be the third.

Looking back over the last thirty years of commercial history, there have only been three unicorns at IPO.

Now Byte Company was one of them; everyone certainly had reasons to be happy and proud, and this might even make it into Harvard Business School textbooks.

Moreover, Ford was an automobile company, Apple was a computer company, and Byte was a software company.

This meant it was undeniably the fastest-growing software enterprise in history.

As for a US$2 billion valuation, honestly, Dean had only tried shouting out that number just to see.

He knew it was impossible; the current primary market wouldn’t pay for that figure.

Because they too needed to make a margin, their margins were in the secondary market—in the stock markets accessed by the average person.

Byte Company’s stock was underwritten to brokers, who then sold it to large investment institutions, which in turn sold it on the stock markets.

One link followed another, with a margin at every step. If the initial valuation was too high, the large investment institutions would lose interest.

Why do most new stocks go through a rise after listing? It’s because underwriters have already reserved space for a margin ahead of time.

Otherwise, how would the stocks circulate? Where would the profits for the underwriters and the large investment institutions come from?

If the internet craze were to start in a few more years, perhaps US$2 billion would be easy, but not right now.

However, US$1.66 billion was not bad. Dean held more than a third of Byte Company’s shares, you know.

...

"Is Byte Company’s recent IPO red-hot?"

In a Seattle office, carpeted with velvet, Bill Gates pinched his chin, gazing at the computer before him.

The screen displayed version 3.0 of the Teams software, which Gates was scrutinizing seriously for the first time.

"Yes, they’re very in-demand on Wall Street; major investment banks have been sending representatives to the West Coast frequently."

Steve, the head of Microsoft’s Market Operations Division, also focused on the Teams software in front of him.

But unlike Gates’ scrutinizing gaze, Steve looked with a bit of admiration and envy.

"Their software is quite impressive; I’d bet they’ve done a thorough analysis of the Windows system."

Out of all the third-party software Steve had encountered, Byte Company’s Teams was the most thoroughly compatible with Windows.

They rarely faced coding-level conflicts or BUGs, which was no easy feat.

Keep in mind, not even Microsoft’s internal software development teams could necessarily achieve this.

Just this technical prowess, along with the patience to sift through seas of tedious code for inconspicuous bugs, earned Steve’s respect for Byte Company.

"The market potential for instant messaging software has been proven, hasn’t it?" Bill Gates’ eyes sparkled.

"What?" Steve was still lost in praise of Teams.

"I mean..." Gates turned his head, the bright light from the screen reflecting the interface of the Teams software on his glasses, "can Microsoft develop such software?"

"Bill, are you saying..." Steve’s face showed a moment of astonishment.

"Come on, get me a market evaluation as soon as possible. I need to know their approximate potential."

Gates had read the reports from Wall Street, but he scoffed at the amateurs’ vain attempts to understand the field.

He trusted Microsoft’s marketing department more; after all, they were the most authoritative software company in the world.

He enjoyed the sensation of accumulating wealth and liked to watch Microsoft steadily grow its empire.

Last year, he had tried to buy Byte Company, but Dean refused, and at the time, Gates didn’t take it seriously.

Now Gates understood that Byte Company could not be bought; it had already begun to resemble a software giant.

If they couldn’t gobble up this piece of fat, then why shouldn’t Microsoft do it themselves?

They had the strength and an unparalleled advantage to do so.