What's wrong with me being a rich man?

Chapter 107 Expectations
Yu Xing spent two days in anticipation, always paying attention to and thinking about the changes in Focus Media's stock price.

However, although Focus Media's stock price fluctuates around US$15, it does not seem to be affected by the peak, but is still due to the overall economic environment and market changes.

Throughout 2008, Focus Media's stock price had been falling. Its peak price in November 2007 was US$11, with a market value of nearly US$65.1 billion. However, the stock price, which had been slowly declining, fell to US$80 after the financial crisis, with a market value of just over US$20 billion.

In January this year, Focus Media’s stock price failed to hold the barrier and has entered the range of US$15+, and its market value has also fallen from the US$20 billion mark.

Such a sharp drop in the market, and the negative news from an unknown research company in Hong Kong and some media seemed to have made it feel unresponsive. It had no reaction at all, and there was no official response on the surface.

"Xiaoying, seeing how Focus Media has fallen, I doubt that even if we don't short sell, we can still make a profit if we buy PUT directly..." Yu Xing seemed a little helpless during the call with Liu Wanying.

"Do you want to discuss operations with someone who lost a lot of money in the financial market?" Liu Wanying asked Boss Yu for his opinion.

Yu Xing said with a smile: "Don't underestimate yourself, it's all the market's fault, not yours."

Liu Wanying also expressed her rare worry: "Logically speaking, once our detailed research report is released and the American attorney contacts the SEC, Focus Media's stock price will inevitably fall. But I am a little worried that Focus Media's stock price has fallen too much and we won't be able to make much profit."

Yu Xing said categorically: "Impossible!"

Liu Wanying asked: "What's your opinion? Have you figured out the calculation formula I sent you before?"

“I haven’t studied it thoroughly, but I can see from logic that Focus Media still has a market value of more than 1 billion US dollars. If there is a problem of financial fraud, how can it not be affected?” Yu Xing expressed his confidence, “You are too concerned. Even if the SEC did not take action before the New Year, it will take action sooner or later after the New Year.”

Liu Wanying was silent for a while, then sighed, "Yes, that's the truth, but if the SEC doesn't take action, I'll have to spend this year in trepidation. I bought the PUT until March 3, so there's plenty of time anyway."

PUT is a put option, which is a common means of short selling profit and is a right in nature.

That is, once you buy, you have the right to sell a certain stock at an agreed price and quantity within a certain period of time.

Just like Focus Media’s PUT, Liu Wanying bought PUT from a brokerage firm, which was scheduled to expire on March 3. The exercise price was US$20, and the option premium paid was US$12.5 per share.

This means that no matter how much Focus Media's stock price falls, she can sell the shares at $12.5.

If the peak-crossing action takes effect and Focus Media's stock price suddenly drops to $5, the whole process is that Liu Wanying buys $5 worth of stocks from the Nasdaq market and still sells them at $12.5 at the brokerage firm, making a profit of $7.5 per share.

Of course, in actual operation, Liu Wanying does not need to buy stocks in the market to exercise the options. The brokerage firm will automatically handle this process, and she will receive the difference in cash income.

Buy PUT → stock price falls → exercise option → make profit. Liu Wanying does not need to actually own the stock, the price she pays is the option premium.

Focus Media’s option premium is US$2.5 per share, and a standard PUT is 100 shares, so the cost is US$250.

Based on the current stock price of $15, the $250 can leverage 1500 shares of stock worth $100, achieving high returns at low cost.

However, the future of stocks is always unpredictable. If the option is not exercised or the PUT is not traded at maturity, the $250 will be wasted.

What Guoshanfeng is doing now is to suppress the stock price and create space for exercising options to make profits.

Yu Xing received a detailed explanation from Liu Wanying, and even the relevant formulas of the BSM model were used to discuss the unreasonable pricing of PUT option premiums by securities firms, but it was indeed a bit complicated.

He was happy to learn new knowledge, but the short-term Treasury bond rates, annualized volatility of underlying asset prices, and cumulative distribution function of the standard normal distribution in the Black-Scholes-Morton model always made him want to shift his attention to corporate affairs.

"Raising funds is not as easy as I thought, but Sequoia's Shen Nanpeng wrote me back, so maybe we can talk before the end of the year." Yu Xing and Liu Wanying expressed their feelings to each other, "However, now that Shanfeng has taken action, Xiaoying, have you ever considered setting up an equity private equity fund like Shen Nanpeng and Xu Xin did?"

Liu Wanying laughed dumbly: "You change your mind every once in a while. You don't want me to start a small consulting company? Now that I've seen the investor, you want me to do it again?"

"I haven't seen her before, but now that I've seen her, she's really good, but she's only that good." Yu Xing said with a smile, "After I met Xu Xin that day, my first thought was, what's wrong with my Xiaoying?"

Liu Wanying said bluntly: "I have no interest and no resources."

"If Focus Media's money makes a profit and we can't find a second target in a short time, what are you going to do with your money? I think we can give it a try." Yu Xing urged, "Or, if you are not interested, I will follow Shen Nanpeng's example and set up a private equity fund. You have money, are you willing to be my LP?"

LP stands for Limited Partner, a partner that provides funds to private equity.

Liu Wanying thought for a moment and said, "If I can make a lot of money, I can invest some money in your company and become your LP."

"LP, hello." Yu Xing said seriously, "Are you spending the New Year at my house this year?"

Liu Wanying was at a loss, not knowing how she had suddenly shifted from career planning to New Year arrangements.

She thought about it for a moment and couldn't help but sigh: "It's really boring that you mix up the abbreviations like this."

"Really? If you don't become my LP, I will ask my teacher to introduce me to an LP during the Chinese New Year." Yu Xing said with a smile, "Xiaoying, are you looking forward to the moment when the short selling is successful?"

Liu Wanying suddenly remembered something. It seemed that they had talked about waiting until the short selling was successful before talking about love.

She asked back, "Aren't you waiting for my brother to introduce you?"

"Yes, I will follow Shen Nanpeng's example and set up a fund. I will ask my teacher to introduce me to fund partners, and then invest the money in Bai Xiaosheng." Yu Xing joked, "If the short selling is successful, you will have nowhere to put your money. Why not invest in Bai Xiaosheng? Aren't you looking forward to it?"

"Boss Yu, why did you push me to start a fund? It hasn't even been successful yet, and you're already eyeing my money." Liu Wanying suddenly realized, "I just don't know if your words are any use to investors."

"Why is it useless? Xiaoying, I think this short sale will definitely succeed. There is no more solid way than counting the screens myself." Yu Xing said seriously, "If I was willing, I could have raised money from Xu Xin a few days ago. Shen Nanpeng also said he wanted to take a look. Think about it, if you are willing to invest money, you are investing in a project that has been reviewed by Xu Xin and Shen Nanpeng."

He said his plan: "If Capital Today and Sequoia can't give me the price I want, I will use the money from Focus Media and come back to them in the next round."

Liu Wanying didn't know whether to laugh or cry: "Now this is the project that Xu Xin and Shen Nanpeng have reviewed? When you meet other investors next time, do you have to use this banner?"

"Is there a problem?" Yu Xing said confidently, "All Capital Today needs is my signature."

Liu Wanying thought about it and said, "Do you really want to invest the money from short selling? Although I invested in the angel round, but... are you so confident that you can make Bai Xiaosheng a success?"

“Even if we can’t go public, the early money can still bring returns,” Yu Xing said confidently.

There is nothing wrong with Bai Xiaosheng’s model.

This can be seen from the company Maimai. Although it is not listed, it was able to raise $2 million in its D round and its valuation exceeded $10 billion. Compared with the current Bai Xiaosheng, it has naturally increased in value. Advertising, users, recruitment, the revenue structure is very clear.

What's more, there will be a wave of PC turning to mobile in the next few years.

Yu Xing felt that no matter what he did, as long as he grasped the model and direction, he would make back the money he invested. If he really couldn't open up new horizons, he could just sell the company like he did with Guiai.com, and he would surely be able to gain cold financial freedom.

With this bottom line, as the company grows bigger, with more users, more experience, and a larger team, Yu Xing wants more.

Seeing that there was no sound on the other end of the phone, Yu Xing tentatively asked, "How about, since you are free during the New Year anyway, I will send you a letter of intent for financing?"

The necessary procedures still need to be followed.

Liu Wanying put away her thoughts and ended the call: "Ask your teacher to introduce LP to you and let LP read your letter of intent."

Yu Xing put down his phone, thinking that Xiaoying would be more irritable after losing her job.

He thought about short selling and financing for a while, and waited for the third-in-command Zhong Zhiling to come back from the field promotion.

Zhong Zhiling was not idle after returning to Shanghai. He continued his targeted promotion work wholeheartedly, hoping to add a little more weight to the company's financing chips.

When he walked into the president's office, the first thing he saw was the formula on the whiteboard.

"Hmm? Brother Xing, what is this?" Zhong Zhiling looked at it for a few seconds and said in surprise, "Is this the cumulative distribution function of the standard normal distribution?"

"Oh, the one who was admitted to graduate school is here." Yu Xing said with a smile, "You are good at math."

"It's a special normal distribution, with a mean of 0 and a standard deviation of 1. I almost went to study mathematics back then." Zhong Zhiling sat down and handed over the work report.

Yu Xing flipped through it casually and saw the latest weekly marketing results in five cities, with an average of 150-200 new users per day.

As the Chinese New Year approaches, Bai Xiaosheng needs to make a rough plan for the work of the coming year.

"Once our money is in place, your work will definitely be easier with the brand promotion." Yu Xing said, "Well, let's work overtime tomorrow to discuss recent work. Your work is definitely up to standard, the atmosphere of website operation is also good, and Xiaoying's work is also up to standard."

With the growth and stability of users, a large part of the content that has appeared on Bai Xiaosheng in the past week has been a comparison of year-end bonuses and New Year goods of different companies.

This is what Yu Xing would like to see happen, and it is also the direction that Lv Haiying is working hard to promote.

Although it is positioned as a platform for workplace social networking and workplace topics, Bai Xiaosheng's main activity since its launch is still "workplace topics". It has successively released major topics such as "college student employment", "Internet marriage and love industry", and "Xiecheng layoffs and insurance policies", and successfully increased the total number of users to over 10.

The activity of these users is definitely highest when the topic appears, and then it drops significantly.

An important task that Bai Xiaosheng needs to do now is to transform topics into common small topics and cultivate a spontaneous social atmosphere among users.

The Chinese New Year is a good time. Things that people in the workplace are closely concerned about, such as year-end bonuses, New Year's goods, and job hopping after the holiday, are not as explosive as big topics, but they are enough to maintain good daily activities.

This is a good phenomenon for the development of the website, and it is as sustainable as the "college student employment" at a fixed time every year.

Lv Haiying has already made relevant plans, including activities such as the Chinese New Year, spring recruitment, autumn recruitment, Mid-Autumn Festival, selection of users' favorite companies, list of companies with the most negative user reviews, industry salary revelations, and other topic activities.

Coupled with the fact that anonymous topics are very easy to appear, the activity soil and drainage mechanism of website users have formed a framework.

"As for Brother Feng, he has worked hard for the company and his work is up to standard. His girlfriend has only been here for a short time and the budget has not been allocated yet, so there is no need to comment on him."

"After the New Year's calculation, it seems that my work is not up to standard, and I have not yet received the financing funds I need."

Yu Xing reflected on this.

Zhong Zhiling quickly said, "Brother Xing, without your guidance, how could our work be qualified? As for the financing, it is their loss if they don't invest."

Yu Xing gave a thumbs up and took precautionary measures: "Xiaoying is also helping us to find money. If Capital Today and Sequoia don't have very good conditions, we don't have to rush to take their money."

Zhong Zhiling vaguely felt that this was the main point of his senior brother's speech.

He hesitated for a moment, but still asked, "Brother Xing, is there any bad news from Capital Today and Sequoia?"

Yu Xing shook his head: "No, I'm still waiting."

As soon as he finished speaking, a message came from the phone on the desk. It was from Shen Nanpeng of Sequoia, inviting Bai Xiaosheng's team to meet, but the location was surprisingly the office of Capital Today.

"Okay, there's new news. Shen Nanpeng wants to meet and talk." Yu Xing thought for a while and said, "But he actually met us at Xu Xin's place. This is really bad news. Do the two have a good relationship? Have they communicated in advance?"

Zhong Zhiling naturally had no answer.

Yu Xing also didn't intend to get an answer, but just felt that under the current situation, the price offered by Shen Nanpeng would definitely not be raised.

He casually analyzed the tacit understanding between the two institutions.

Zhong Zhiling asked worriedly: "What should we do then?"

"The worst condition is to get 200% of the shares for 30 million US dollars, which is actually acceptable." Yu Xing said slowly, "But what I want to strive for is 300% of the financing of 20 million US dollars. It would be fine if it can be on the upper limit. If it is not given at all, it will be a bit..."

The valuations for the upper and lower limits differ by more than a factor of two.

He thought for a long time and said, "Let's see how the meeting goes on the 18th. If they add a little, we can have a good New Year. If they don't add anything, we can just postpone it until after the New Year..."

If Tsai Ing-wen announces the results, then whoever wants to vote can wait for the next round.

Shen Nanpeng's appointment date is January 1, which is one week left before the Chinese New Year, and the attorney Liu Wanying is looking for will take action on January 18, US time. At the same time, the Guoshanfeng official website will soon release the complete version of the research report.

Yu Xing exhaled and slapped his right hand on the desk: "There are many domestic institutions, and their one dollar can't be regarded as two dollars. Don't worry!"

Don’t worry, Capital Today and Sequoia Capital have a tacit understanding, and Focus Media is still waiting to invest!
(End of this chapter)