Rogue Code (14 page)

The money talk was ironic in Sam’s view as Toptical had all started out as nothing more than fun and games. She couldn’t believe how fast a late-night brainstorming session had become tangible, how quickly Toptical itself had become a household name. She’d heard stories of the success of other “overnight” companies, many of them companies the general public didn’t know, but this! Now they were a week away from becoming rich. Very rich.

“The IPO is set, Molly,” Gordon said. He was a handsome man, fit with a finely featured face and near constant smile. “We heard you on this last year, and you’ve made your position clear many times since then. The decision is made. We can’t cancel at this late date. You need to move on.”

“Of
course
we can cancel,” she said emphatically. “It’s happened before. I’m not saying it will be easy and not cost us
some
money, but we’ve got it. If we stay as we are, then we remain in control, we can keep Toptical what we want it to be. Once we go public, we
lose
control. Doesn’t anyone else see that?”

Brian glanced up. “The decision is final, Molly.” He looked back down.

Molly stared at him as if he’d just walked into the room, blinking rapidly. “Okay, then consider this. The stock is
overpriced
.” This was a theme she’d repeated for the last month. “We’re set to go the way of Facebook.”

“Nothing wrong with that,” Gordon answered with a smirk. “Zuckerberg made out like a bandit.”

“Sure, and so did a lot of those at the top,” Molly continued, “along with the early backers and underwriters, but look what people
think
of them. They came across as greedy. I don’t know about you, but that’s not how I want to be seen. That’s not
why
I work here. That’s not who we are.”

Sam eyed Brian evenly. He was fixed on his iPhone, which lay on the blue-bound prospectus in front of him, occasionally punching at it. She’d been living with Brian four years earlier, when they’d been bitten with the bug. She and Brian had seen the inherent weakness of Facebook and of the other social networking sites, anticipated how quickly users would become disenchanted as marketers leveraged them, and they stopped being fun. They’d constructed Toptical with all that in mind, more for the challenge of it than for anything else. They’d thrown into the hopper everything they wanted in a social networking site, and a real company had quickly emerged from that.

What they devised was a one-stop shop, enabling businesses and users to establish accounts that integrated user groups, topics, family and friend groups, affiliations, video, and much more. It was far more comprehensive than Facebook because it had topics that served as discussion areas, a place to post videos, pictures, and articles, buy media content, play interactive games, obtain notices of discounts and coupons, and much more. It was of particular use to business customers because it integrated their various public faces, but let them connect to their personal identities, keeping the activities and membership of each side linked, but still separate. From an investor point of view it had a built-in monetization process, underdeveloped as yet, but demonstrated the potential for a dramatic upside. The buzz surrounding the IPO was everywhere.

Inevitably, the concept wasn’t so original now as it had been then. Now it seemed every major Internet player wanted in on the action. But they’d been first, they were by far the biggest, and they had the brand.

“Who cares what people think about us?” Gordon said, looking around the table for confirmation. No one reacted.

“We should,” Molly insisted. “Right now, we’re cool, like Facebook used to be. If we stop being seen as cool, it will hurt us. It will affect how successful the company is down the road. We need to
think
about that.”

“That’s crap,” Brian said, glancing up from the table. “You brought up Facebook yourself, and it’s doing just fine. What counts is the quality of our product. Anyway, the time is right for this. We need to take adv—”

“We’ve got maybe a two-year lead on the others,” Adam said. “That’s more than a lifetime in this industry. I think Molly’s got a point. I’d like us to keep control without having to consider investors, the SEC, all of that, but I agree that this may be our only shot at real money. I get that, so I’m on-board for the IPO. What I don’t like is Morgan Stanley releasing more shares. I think we’re oversubscribed, and it’s going to dilute our share value.”

“They told me demand requires it,” Gordon said a bit defensively.

“And what if their principal clients don’t come in as strong as they claim?” Molly asked. “What if demand isn’t as high as they tell us it is? We’ve got
trouble
that’s what. The stock could go into free fall.”

“The company’s valued at a hundred billion dollars today,” Brian said, now fully engaged. “That leaves a lot of room for market adjustments.”

“That’s hype,” Molly said. “It’s thirty billion tops, Brian, like the prospectus says. The other figure is for PR.”

Brian smiled mischievously. “It’s still a lot of bil—”

“And where’s the money coming from?” Adam said, interrupting again. “Isn’t that the big issue here? It’s not my side of the business, but the underwriters are concerned.” He tapped the blue folder in front of him. “They dress it up, but it’s there. It’s why they released this at the last minute. They’re covering their asses.”

“Google, Microsoft, Twitter, even Facebook, they’re breathing down our necks wanting to buy us out, and they’ve got
deep
pockets,” Molly said. “The money they’d spend acquiring us would be a loss leader for them. They don’t need to make money with us. We do.”

“It’s not just them,” Adam added. “Right this minute, in some garage, there’s another Brian and Sam working on an idea to take us out.”

“What do
you
think, Sam?” Molly asked, looking at her eagerly.

Sam shrugged. “You all know what I think. I’ve said it often enough, and I was outvoted. You were one of those votes, Molly, if you recall. We should position ourselves for a takeover rather than risk an IPO. I agree with canceling next week. This prospectus gives us plenty of reason. Our subscribers will think we’re rock stars. Our future is brighter if we’re taken under the wing of a major player. We can cut our own deal, which leaves us running the show. We still get rich, but we get to keep control.”

“She’s got a point,” Adam said. “Those two at Google want us so bad they upped their offer just last week. They’ll cover any costs of canceling the offering. I ran the numbers for myself over the weekend. I’ll do about as good with them as with an optimistic reading of the IPO. I could go with Sam on this, especially after reading this update.”

“There’s no risk,” Gordon said, his eyes still fixed on Sam.

“Right. No risk,” she said. “As for the IPO I agree the stock’s overpriced. I don’t claim to understand what our underwriters are telling us, but they’ve got us valued at one hundred times last year’s profits. I think that’s at least double where we ought to be. It concerns me.” She tapped the folder. “This revised prospectus is a warning, Brian.” She looked across the table at her former lover. This company had destroyed their personal relationship, and over this last year, he’d largely stopped listening to her. “What if Morgan Stanley’s major clients back off like Molly says? I think this report is telling them to do just that. What’s going to happen is that the public who love us and come in on launch day are probably going to take a bath, and Molly’s right there too; it will hurt us. And we’re vulnerable right now.”

“We’ll be rich,” Gordon said slowly, as if speaking to children. He hadn’t been there at the beginning. He’d come later. Brian had never told her why he’d hired him, but Gordon had joined a running company, and so he had a different perspective. He’d located this building for them for one. A former synagogue, it had been in a sad state of disrepair and never brought up to speed. Because of the poor heating and an inconvenient layout, everybody hated working in it, but he’d told Brian it was some kind of deal they had to take. It had an attractive appearance and impressed the second round of investors who were impressed by cool. It served as a persuasive forum from which he smooth-talked private investors, even handled some of the media duties. He was a natural.

And Sam trusted him about as far as she could throw him.

“Our early investors want their payday,” Gordon said. “We need to get that. They’re tired of us, tired of HDTVs in the work spaces, tired of our frat boy mentality, the lack of a dress code or even basic professional behavior.” He’d argued against all of that since coming on board, Sam had to give him that. “They want a professional management team.”

Brian made a face but didn’t speak.

“The IPO’s being
manipulated
, Brian,” Molly argued, leaning forward aggressively across the table. “Wall Street doesn’t care about Toptical, about our
vision
, how it changes lives, what it means to the world. All that matters to them is how much money the launch makes. And there are jackals out there who will sell us short at the first hiccup next week. We need to back out,
now
.”

“I’ve got confidence in our underwriters,” Brian said. “I’m not pretending I understand all the ins and outs. That’s Gordon’s area, but he tells me the price is about right. This isn’t science, Molly. No one knows the real value of the company.” With that last comment he shot a look at Sam.

Sam could still see what had drawn her to him: his smooth style, his steadiness under pressure, but for the last year, ever since the IPO date had been picked, she had this feeling that he was out of his depth, and knew it.

“Molly,” Gordon said, “you’re going to be very rich even if the underwriters are wrong. The initial shares being offered largely come from this table, and projections are that they’ll be snatched up. It really doesn’t matter to us personally what happens downstream. By ten o’clock Wednesday morning, we’ll be more concerned about the tax bite than the price of the stock.”

“That’s something else we need to consider,” Adam said. “Founders and early backers typically represent about ten percent of the stock first sold to the public. We’re over forty percent, not as bad as Facebook was, but bad enough. It makes it look like we don’t have any faith in Toptical and want to get our money while we still can.”

No one spoke; then Brian said, “We’re always one bad move away from insolvency. I think you all need to remember that.”

“Thank you, Jeff Bezos,” Molly said. “I’m not in this just to make money. Toptical
means
something. It changes lives.”

“It’s social networking,” Gordon said, spreading his hands before him. “That’s all. And what do you propose we do, Adam?”

Adam shook his head. “I don’t know. Be careful I guess. Maybe do what Sam suggests. It’s a lot safer.”

Brian leaned back. “Look at it this way: We’re top dog right now, and I plan to make sure we stay there.” His eyes turned to Sam’s face, as if acknowledging her role. “But the big boys are right behind us, not to mention the kids in the garage. We have no way of knowing if we can stay in front. We need to make it now. All this—” He gestured toward their building as if they owned it, as if everyone at this table loved it. “—could be gone in months if the public turns somewhere else. Frankly, I wouldn’t want to be in Facebook’s shoes right now.”

“And what’s this about changing lives?” Gordon said sarcastically. “Toptical takes people out of their boring existence. If they had real lives, they wouldn’t be using a computer as their primary way to connect with other people.”

Sam grimaced. “What if it goes wrong?” she asked. Brian looked at her sharply. “What if these wonderful underwriters are stacking the deck so they do okay no matter what? What if the IPO is a disaster?”

“That can’t happen,” Brian said evenly.

“It happened to BATS, and it was their area of expertise. Nobody made any money there. All they got was a black eye they’ll never recover from. It can happen to us. Don’t kid yourself.”

Sam noticed from the corner of her eye that they’d drawn a crowd. She hadn’t realized how loud they’d become. Several employees were gawking openly at them. Seeing her look they hurried off. Life in a fishbowl, she thought savagely.

“Let’s settle down and focus on what we should really be concerned about,” Adam said. “All that pricing stuff is out of our control. It’s all in place now. It’s the technology that really concerns me. I talked to someone with IT at the Exchange. They’re using a new program for us. I don’t like being a test subject.”

“I know about that,” Brian said. “It’s a special program just for IPOs. They don’t want any of the problems BATS had—or Facebook, for that matter.” NASDAQ had courted Facebook to handle their lucrative IPO; then their software delayed selling for half an hour on launch day. It had sent a shiver through the market. There was no telling how much money it ended up costing the company because of lost confidence.

“Adam’s got a point,” Sam said. “We all know the track record of untested code when it goes public the first time.”

“It’ll be fine, they learned from their mistakes,” Gordon said.

“What the hell do you know about it?” Molly snapped. “Stop pretending you know everything. You’re the
finance
officer!”

They continued for another ten minutes and in the end, settled nothing. As everyone filed out Sam held Molly back. When they were alone, Sam said, “I know you’re concerned. I appreciate the passion, but this thing is set now, Molly. I’ve had to come to terms with it, and so should you. We’re just along for the ride at this point.”

“I know. I know.” Molly was close to tears. “It’ll just break my heart if it goes bad. Toptical means
everything
to me.”

18

EDIFÍCIO REPÚBLICA

RUA SÃO BENTO

SÃO PAULO, BRAZIL

4:56
P.M.

Bandeira’s office was located on the forty-third floor of the Edifício República, and he never failed to take in the expansive view at least once each workday. The towering skyscrapers, the choked streets below, even the ever-present pollution all represented wealth and power. They reminded him of just how far he’d risen. And as often happened at such moments, his thoughts turned to the past.