From legendary short seller to god of American capital

Chapter 415 Larry figured it out in ten seconds and prepared to enter the hunt.

As Mr. K left the alleyway in the Xia Dong district, the morning mist had just dissipated behind him. He hired a carriage, took two henchmen with him, and instructed the driver to go to the Dead Rabbit Gang's billiards room, where he still needed to cash in his bets on the US presidential election with Larry.

Last year, when the two of them were designing legal betting tickets with the Dead Rabbit Gang, they happened to encounter betting tickets for the presidential election being issued.

Larry Livingston didn't hesitate to place a $5 bet on Cleveland being elected.

At the time, Mr. K thought his boss had gone mad! But he then followed suit without hesitation and spent all the money he had on him—$1300—on Cleveland.

Mr. K knew one thing: even if his boss were to jump off a skyscraper, he should jump after him immediately. Because following him would guarantee victory!

As expected, Cleveland won the election and became the 24th President of the United States, the first U.S. president in history to serve two non-consecutive terms.

As a result, Larry made a net profit of $75000 on the betting tickets, a net profit of 150%!

Mr. K himself made a net profit of $1950 from his $1300 investment.

With interest, Larry will get back $12.5, while Mr. K will get back $3250.

Larry might not care about the small amount of money, but Mr. K was secretly overjoyed. He had wanted this money for a long time!

The only reason they haven't been able to claim their winnings is because the clearing and settlement process for the presidential betting pool takes a long time, and because the tickets have been sitting in a safe deposit box at Citibank.

Mr. K's most important task during his trip to New York was to cash in his winnings from the betting tickets—now, all of Mr. K's attention was focused on these winnings.

—If his boss hadn't told him to investigate the Rostan Gang first, he would have gone to find "Mr. Honesty" immediately.

Now that Rosstein's investigation here was complete, Mr. K was eager to pocket his $3250. So he kept urging the coachman to hurry.

But just then, his hand, reaching for a cigar, inadvertently touched the pawn ticket Abel Rothstein had given to his boss. Mr. K suddenly hesitated. He had a premonition that Larry would be far happier to see this pawn ticket than to see the $12.

Should he send the pawn ticket back to Larry first? Mr. K hesitated. He could even see the sign for the Dead Rabbit Gang's stronghold, "Lucky Star Billiards Room." But what if this pawn ticket was really important?

Although cashing out the betting tickets only takes a short hour—which shouldn't cause too much trouble—what if something goes wrong?

Mr. K thought for a moment, then immediately yelled at the coachman, "No more Bowery Street! To the Waldorf Hotel! And hurry!"

Larry was looking at a map in the outer room of his private office on the 8th floor of the Waldorf Hotel—a huge map of Manhattan was spread out on the mahogany table, with more than a dozen locations circled in red, which were the key locations he was focusing on for his planned real estate projects.

"Boss, Mr. K is back—he looks a bit rushed!" Caul said as he approached.

Larry frowned slightly, his eyes still glued to the map. "Let him in!"

A short while later, a series of hurried footsteps echoed in the hallway.

"Boss!" Mr. K pushed the door open and slammed it shut behind him.

Larry looked up at him. He had known Mr. K for two and a half years and knew what this gesture meant—it wasn't necessarily a bad thing, but it was definitely something that couldn't be heard by others.

"Go and order lunch from the hotel for me, and bring me a box of cigars!" Larry instructed Rabbit Cole beside him.

Without hesitation, Kaul left the room.

"Is the Lower East Side matter settled?" Larry put down his red and blue pencils. "What did Jimmy from Rostanbon say?"

"Jimmy's all right—" Mr. K walked to the table, "but I ran into someone else."

"Who?"

"Abel Rothschild!" Mr. K paused, "The son of Monk Rothschild."

Larry raised an eyebrow slightly. Although Monk Rostan hadn't died directly at his hands, he was still greatly involved, after all, he had once been to the betting agency—hearing that name now, Larry became slightly more wary.

"What's wrong with him?" Larry asked.

"He wants to talk business with us," Mr. K handed Larry a folded piece of paper from his pocket. "He asked me to give this to you, saying this information is worth an integer. If you can figure it out, then there's hope for a collaboration between us; if you can't—"

"Then there's no need for cooperation." Larry said on behalf of Mr. K, a slight smile playing on his lips. "Interesting."

Larry took the paper and unfolded it.

This is a pawn ticket from "Gentlemen's Pawnshop" in Lower Manhattan. The printing is very rough, and the paper is yellowed. The name of the pawnshop is printed at the top of the ticket, and below it is a line of small print: "All items can be used as collateral."

Pawned item: One hundred 5% dividend preferred shares of the National Rope Company.

Face value: US$100 per share.

Pawn amount: US$4000.

Date of pawn: April 17, 1893.

Signature of pawner: John R. Dorsey.

Larry's gaze remained fixed on the pawn ticket.

Mr. K stood to the side, waiting for his boss to speak. He saw Larry's eyes narrow slightly, then fixate, like a hound sniffing out a scent, like a gambler hearing the sound of shuffling cards.

Five seconds!

Ten seconds!

Larry didn't move.

Then Mr. K saw something that sent chills down his spine—Larry's lips began to curl upwards. Not a smile, but the kind of irrepressible excitement that comes from the depths of a starving person seeing a bloody steak.

"Boss?" Mr. K asked tentatively.

Larry didn't answer. He put the ticket on the table, picked up a pencil, and wrote a few numbers in the blank space on the Manhattan map.

"100 shares * $100 face value = $1 face value".

The pawnshop only gave $4000.

40% mortgage rate —

The pencil suddenly stopped. Larry looked up at Fifth Avenue outside the window. Sunlight shone on the red rooftops across the street, and several seabirds flew over them, chirping loudly.

His gaze traveled across the rooftops, past the seabirds, past the white smoke billowing from the chimneys, and toward a place he had never been before—the offices of the National Rope Company.

"Old K!" Larry's voice was soft, but very serious.

"I'm here."

Have you seen that guy named Dorsey?

"No! Rosstein said he lost $2000 gambling and simply used the pawn tickets he had secured with his preferred stock to pay off the debt—Rosstein sent someone to the pawnshop to check, and it's true." After Mr. K finished speaking, he repeated everything Abel Rosstein had told him, trying to use the exact words.

Finally, Mr. K said, "Mr. Dorsey said he can redeem the shares next Monday because the company has a large sum of money coming in!"

Larry nodded, and his fingers began to tap lightly on the table, once, twice, three times, with a steady rhythm.

"Next Monday," Larry repeated the word, his smile widening. "Today is Wednesday, April 19th."

Next Monday is April 24th.

He suddenly stood up, walked to the window, and turned his back to Mr. K.

"Old K, do you remember those few operations we did? The reason we were sure the stock price had peaked was because insiders had no intention of buying the stock."

Mr. K paused for a moment, then said, "Yes, you said that."

"The underlying message is," Larry said, his back still but his tone strangely excited, "we want to see how the company's insiders treat their money."

Larry whirled around, the sunlight casting a golden rim behind him, shrouding his face in shadow, leaving only his eyes frighteningly bright.

"National Ropes Corporation!" Larry's eyes narrowed slightly. "They make cables! For ships, for docks, for railroads—but shipping is practically dead right now, and railroads are being pulled from their loans—do you know what that means?"

"Their business is not doing well."

"It's not just difficult!" Larry laughed, "it's almost dead, but just then, the company's CFO took his 1 shares of preferred stock and pawned them for $4000."

Larry paused, as if organizing his thoughts, "Preferred stock with a face value of $1, this is preferred stock! Old K, this is not common stock, but preferred stock—the company will pay preferred stockholders first if it goes bankrupt and is liquidated."

The company's profits and dividends are also distributed first to preferred stockholders. This is the company's most valuable asset, more valuable than the boss's life—yet the pawnshop only gave them $4000!

"This thing isn't worth anything anymore? It's 40% off." Mr. K followed Larry's train of thought.

"Yes!" Larry walked to the table, held up the pawn ticket, and examined it against the light. "Who is the pawn shop owner? He's a shrewd guy who's been in this business for an average of 30 years. Every day, he handles more collateral than you or I have ever seen a banknote. He can tell the value of a gold watch, a leather coat, or a stock just by weighing it in his hand."

With a thud, Larry slammed the pawn ticket on the table.

"His offer of 4000 indicates that in his eyes, these 1 preferred shares are worth at most 4000, or even less. Why?"

Mr. K swallowed hard. "Because—there's something wrong with this stock?"

"Or there's something wrong with this company," Larry's smile widened. "The news has already leaked out. The pawnshop owner is a sly old fox with his own connections. He might have heard something, or he might have learned something from his friends at the bank. In short, he knows that the National Rope Company is about to go under, and this stock might be worthless."

Mr. K suddenly realized, "That makes sense! Boss, who would discount $10,000 by 40%, and with no objection from the pawnbroker or the pawnshop—"

"But the most exciting part isn't the pawnshop owner," Larry said with a smile and a wave of his hand.

"Is it... Mr. Dorsey?" Mr. K asked tentatively.

"That's right, it's him!" Larry's eyes narrowed again. "The CFO of National Rope Company. Besides the boss and the chief accountant, he knew better than anyone how much money the company had, how much it owed, and how many days it had to live—and this guy had 1 shares of preferred stock, and then he pawned them!"

Following this line of thought, Mr. K continued, "That's right, he didn't take out a bank loan or borrow money from friends—he could have waited for Monday's big payout to pay off his debts, but he just pawned it—"

"Because he never intended to redeem it!" Larry's voice suddenly softened, as if he were talking to himself. "He told the pawnshop he'd redeem it next Monday, but that was just an excuse to trick them into accepting this worthless ticket. His real thought was—to exchange it for some cash while he could, even if it was only 4000, that's still cash, better than waiting until next Monday." Before Larry could finish, Mr. K already understood!

"That supposed big payout next Monday is a lie!"

"It might not be fake," Larry shook his head slightly, "but it definitely won't reach the shareholders. It might be used to pay off maturing bank loans, cover previous misappropriations, or pay off debts to suppliers—in short, it's not for dividends."

Dorsey knew this, so he wanted to convert his stocks into cash before the announcement—do you know what that means?

Mr. K shook his head.

Larry laughed again, this time with undisguised joy, the smile spreading from the corners of his mouth to the corners of his eyes, his whole face glowing.

"This means that National Rope's stock price will crash next Monday!" Larry's voice was low, as if he were sharing his most private story with Mr. K. "Dorsey isn't the only one who wants to run. But if people at his level start running, what about everyone else? What about the speculators who heard the rumors on the exchange? What about the small investors who saw pawnshops refuse to accept the stock?"

Larry bent down and looked at the map, drawing a circle around the approximate location of the National Rope Company in his memory.

"Why didn't he sell his preferred shares on the stock market?" Mr. K asked. "Because the stock market only trades common stock!"

Larry smiled at Mr. K, "If I had any open positions right now—oh no! There's still time, I'll have some open positions right now! Come with me! We're going to Reading!"

Larry got dressed, and the two stepped out of the private room together. Larry's steps were long but steady because he knew there was still time.

On the way, Mr. K took a moment to say to Larry, "That Rothschild—he said this information is worth a whole number. $1000!"

Larry nodded, looking at him. "Interesting! This guy's a real bargainer. If he keeps this up..."

Min, I'm more interested in him as a person!

Mr. K paused, then asked, "You want him—"

"First, I need him to shut up!" Larry said solemnly. "If he runs out, even if it's just to have a drink with his friends and lets something slip, the news will spread ahead of time. I need him to keep absolutely quiet for these three days—Wednesday, Thursday, and Friday—so that I can set up my short positions!"

If you succeed—tell him that he received far more than just a single integer.

>