Trading Reality (22 page)

I looked around the office. It was small, but it was all mine. I had never had my own office before. It felt a bit claustrophobic and lonely; I was used to having a hundred people within my field of vision. I paced around for a minute or two, and then opened the door wide.

Susan, Richard’s secretary, and now mine, came in. She was about thirty, with permed brown hair, and a motherly look about her. ‘Can I get you a cup of tea or anything?’

Having spent most of my working life in a trading room, where secretaries are a rare sight, I wasn’t used to being waited on. ‘No, let me get you one.’

In the end, we both made our way to the machine which dispensed tea.

‘It’s good to have someone in that office again,’ said Susan as we walked back. ‘Especially Richard’s brother.’

‘Had you worked for him for long?’

‘Three years. He was a good boss, although he worked much too hard.’

‘Everyone seems to do that round here,’ I said.

‘Ah ha. But they do it because they want to.’

‘You miss him?’

‘Yes, I do,’ she said, biting her lower lip. ‘The place has had an awful feel about it since he died. I mean his personality used to be everywhere, it lit up the whole factory.’

‘Well, I know I won’t be able to replace him,’ I said, ‘but I will do my best for the company and the people in it. For his sake, as much as anything else.’

‘I’m sure you will. You know, you look quite a lot like him,’ Susan said, eyeing me up and down. ‘And don’t underestimate the goodwill towards you here. We all feel for you, and we’ll all do our best to help.’

‘Thanks.’ I smiled, and took my cup of tea into Richard’s office. FairSystems felt a bit like a family, and if it had been Richard’s family, it was my family now.

I sat down at the smooth black desk, and thought about the company. David Baker bothered me. He was clearly very good at his job. And he clearly didn’t like me being around. Somehow I would have to run the company without alienating him so much that we lost him. We couldn’t afford that. I wondered what had been the cause of the big argument he had had with Richard.

Rachel, too, was impressive, and I was much more confident of being able to work with her. Technologically, it was clear that FairSystems was very strong. We just needed that breakthrough she had spoken about; the high-volume production and mass-marketing that would bring down the price of VR systems so that everybody could use them. That would involve significant risk even for a company as big as IBM. For a company of FairSystems’ size and financial position, it seemed impossible.

I was still intrigued by Steve Schwartz’s theory that a buyer was accumulating FairSystems’ stock at low prices with the connivance of Wagner Phillips. Well, I had a perfect opportunity to find out more about that. Willie and I were having lunch with Mr Wagner himself that very day.

I turned on my computer. It beeped and told me I had an e-mail waiting for me. With a small smile of gratification that my presence in the company had been noticed by the computer as well as everyone else, I clicked on a couple of menu options to call up the message.

Scott Wagner was smooth. He looked good. Broad shoulders under a well-cut suit. Tanned face with a square jaw. Blue eyes that held mine steadily as he talked. Immaculately groomed thick hair. A fit thirty-five-year-old body that emanated well-controlled energy.

He sounded good too. A soft spoken, pleasing American voice. Diction that was clear, slow and measured. Sincere. Powerful, but in a low-key way.

He was in the UK for three days to check out a possible candidate for flotation on NASDAQ, and wanted to meet Willie and me. Willie was obviously in awe of him, alternately flattered to receive his attention, and scared to be in his presence. As he sat at the conference table, he reminded me a little of David Baker, but he was altogether a classier act. He represented what David wanted to become.

We were in the restaurant of the Balbirnie House Hotel, which had been the local laird’s residence when Glenrothes had been no more than an estate between villages. We were the first in the elegant dining room; Wagner was anxious to catch a three o’clock flight from Edinburgh airport.

The waiter came, and Wagner ordered smoked salmon, followed by a salad. No wine, just still water. I thought I would get stuck into some venison, and yes I would like some of the Pomerol, thank you very much.

‘I had a fascinating meeting with Scottish Enterprise this morning,’ Wagner said.

‘Oh yes?’

‘Do you know how many things were invented by Scotsmen?’

‘The haggis? The kilt? The caber? McEwan’s Export?’

Wagner smiled. ‘Much more than that. The telephone, the television, radar, Tarmacadam, penicillin, chloroform, the pneumatic tyre. Even the adhesive stamp! What I can’t figure out is why this country isn’t as wealthy as California.’

‘Because they all left Scotland before they invented any of this stuff?’

‘I guess that must be it. But I still think there’s a great opportunity here for firms like ours which know how to finance young companies.’

‘I hope you’re right,’ I said. ‘Tell me a bit about Wagner Phillips. You have quite a reputation in small-company stocks. But you haven’t been going that long, have you?’

‘We’re coming up to our fourth anniversary. Dwayne Phillips and I set the operation up with half a dozen of our old colleagues. We now employ a hundred people. We’ve had a good few years. The breaks have come our way.’ Wagner’s voice was tinged with pride.

‘Very impressive. Where did you all come from?’

‘Drexel Burnham. I’m sure you remember them, you’re in the business.’

‘I certainly do.’ Drexel had risen from obscurity to become one of the most powerful investment banks on Wall Street. It was Drexel which had organised the biggest leveraged buy-out in history, when Kohlberg Kravis and Roberts had purchased RJR Nabisco for twenty-five billion dollars. They had achieved this through the financial genius Michael Milken, a maverick who had broken all the rules, and ended up in jail for it. Drexel’s excesses eventually caught up with them too; they’d gone bankrupt in 1990.

‘You’ve probably heard some bad things about Drexel,’ Wagner said, ‘and there’s no doubt that towards the end, some in the firm went too far. But there were some exceptionally talented people there, real entrepreneurs. It struck me that that culture would be well suited to financing young growing companies with equity. So, we set up Wagner Phillips to do just that.’

‘And it worked?’

‘It sure did. We’ve done over a hundred initial public offerings since we started out. That’s a hundred companies that have raised finance from the stockmarket to develop new ideas and create jobs for America.’ Wagner hesitated, and then grinned, ‘And Scotland too, of course.’

‘And who buys these shares?’

‘Oh, a range of institutions and individuals. We’re not afraid of risk, and neither are the investors we talk to. They’re often entrepreneurs who have been successful in their own right. They trust us. We look after them.’

Ah, stuffees! Every broker likes to have stuffees, investors who will buy whatever the broker stuffs down their throat.

‘So you have a lot of discretionary money?’ I asked innocently.

Wagner smiled. ‘Let’s just say we like to feel that we have created a little community of investors and companies with similar goals and ambitions. In my view, that was one of the things Mike did very well at Drexel. And everyone benefits.’

‘And FairSystems is part of this community?’

‘Sure,’ said Wagner smiling. ‘And I know we’re going to be right there for you as you grow.’

I wasn’t at all sure I wanted FairSystems to be part of Wagner’s little coterie. He was right that Michael Milken’s success had been built up on a network of clients, all of whom had owed him favours of one sort or another. This network had done wonders for Milken; it had given him the power to frighten the largest corporations in America. True, it had also worked well for many of his clients, but many more had ended up either bankrupt or in jail.

The food came, and we tucked into it. Wagner seemed to have little enthusiasm for his salad, but I liked the venison. The wine was good, too. I looked around me. The dining room was filling up with businessmen, and a few wayward American tourists who had wandered a little off the beaten track and ended up in Glenrothes.

‘Tell me about the share placing last November.’

‘We were very pleased with it,’ he said. ‘We achieved an excellent price of ten dollars, and of course the shares traded up to a twenty per cent premium in the first couple of days. We attracted an excellent investor base, the shares are broadly held. Quite a result.’

And one that had cost FairSystems more than one million of the eight million dollars raised, I thought.

‘Take me through the share price movements,’ I said. ‘After that initial leap, the shares stuck at twelve dollars for a couple of months, and then slid down to six, didn’t they?’ They had fallen further since Richard’s death, but that was hardly Wagner Phillips’ fault.

‘Yes, that was disappointing. But you know, the company wasn’t coming through with what it had promised in the prospectus.’

I wasn’t going to let him wriggle out of it. ‘But the company didn’t release any information at all before the price fell, or indeed until my brother died.’

‘The American markets expect quick results, Mark.’ Wagner was polite, but there was an edge to his tone that implied I didn’t know what I was talking about and I should leave it to the experts. Not enough to be rude, but enough to cause me to feel unsure of myself.

‘I’ve watched the share price closely,’ I said. ‘And something else must be going on to drive the price down, especially given the high volume of shares traded. What is it?’ I knew I sounded aggressive, but I thought the direct question would demand a direct answer.

It demanded but didn’t receive. ‘Gee, I guess the markets just act strange sometimes. We all have to live with it.’

‘What are you telling your customers about us?’

Wagner paused a moment. ‘I guess we’re being a little cautious right now. Not negative, just cautious.’ He saw my frown. ‘You have to understand, Mark, that our analysts must be free to take their own view on a stock. I’d like it if they were a lot more positive, but I can’t tell them what to think.’

Like hell he couldn’t. He had told his sales people and analysts to bad-mouth FairSystems, and the share price was going down as a result.

‘So, who’s been buying?’

‘I’m afraid I can’t say.’

‘You can’t say? But aren’t you our broker?’

‘It’s a difficult situation,’ Wagner said apologetically. ‘But our clients expect us to keep their dealings confidential. We have to respect that.’

‘Is it one buyer, or many?’

‘I’m not sure,’ said Wagner. ‘I guess it would be a number of buyers.’

I didn’t believe him, but it was clear he wasn’t going to tell me more.

‘I was really sorry to hear about Richard,’ Wagner said, picking at his salad. ‘He was a neat, neat guy. How are you finding stepping into his shoes?’

‘Interesting,’ I said.

‘It must all be a little daunting.’

‘Not really,’ I lied. ‘There are good people here, especially on the technology side. We’ll do fine.’

I could see in Wagner’s eyes that he didn’t believe me, but he wasn’t going to challenge me. ‘Uh huh. Well, if you find things get a little hairy, I may be able to find you a buyer.’

Sneaky. I knew he already had a buyer. But he wanted to get me to retain him to find one. More fees, no doubt.

‘Yes, Richard mentioned that you have a prospective buyer. Who is it?’

Wagner’s eyes widened slightly; he hadn’t expected that Richard would have told me this. He recovered quickly. ‘I’m sorry, I can’t say at this time. They’re very eager to retain their anonymity.’

‘But you’re our broker,’ I said again. ‘Don’t you have a duty to tell us?’

Wagner smiled and shrugged. ‘My hands are tied.’

‘What price will they pay?’

‘Well, the share price is at four and a half dollars today, and still drifting down. I’m not sure you could get more than a thirty per cent premium. So, six dollars, I guess.’

Six dollars. That was a lot less than the ten dollar flotation price. But I now owned almost four hundred and eighty thousand shares, so that represented over $2.5 million for my total holding. Selling out for six dollars might end up being the best offer we would get. I would have to keep Wagner sweet. For a moment I regretted being so aggressive with him.

I tried to be civil. The rest of the meal passed in the useless chit-chat of international finance: airlines and airports, the direction of the markets, and a struggle to find obscure mutual acquaintances. Finally Wagner paid the bill, and we left. Outside side the hotel, a driver in uniform stood by a smart black Ford Granada, waiting to take Wagner to the airport. Willie and I shook Wagner’s hand, and he sped away.

I was beginning to regret recommending Wagner Phillips to Richard. I hadn’t really known much about them beyond what Karen had told me: that they were an aggressive, fast-growing firm with plenty of high-tech clients. True, they had succeeded in raising money for FairSystems in difficult circumstances. But at what cost? I had a nasty feeling I had yet to find out.

I turned to Willie. He had been silent throughout the meal. ‘What do you think?’

Willie screwed his face up into a frown, considering what to say. He plucked up his courage. ‘I may be havering,’ he said, ‘but I don’t like him at all.’

I laughed. A good man, Willie.

‘How’s it going?’ asked Karen.

‘Pretty well,’ I said into the receiver. ‘I’m having to learn an awful lot very fast, but it’s interesting stuff. And I had my first brush with investment bankers from the other side of the table.