Chapter 96 Section 4 Success is also Xiao He, defeat is also Xiao He

Contract listing is only the beginning of the influence of investment banks and fund companies on technology companies.After listing, if a technology company is favored by Wall Street investment banks and fund managers, its development will undoubtedly be much smoother, and vice versa. The biggest support for investment banks and fund companies for technology companies is to directly purchase the company's shares. After Google went public in 2004, it was immediately sought after by Wall Street.The world's largest fund company Fidelity Fund, the highest return fund Legg Mason's Value Trust and the most famous hedge fund Renaissance Technology have all bought a large number of Google's shares, making Google's share price double in more than two months .At one point, Fidelity owned about a tenth of Google's outstanding shares.

Wall Street firms' pursuit of technology companies can also be carried out through cost-free means such as improving the ratings of technology companies.Since many investors cannot clearly see the development prospects of a company in the next three to five years, they need to refer to the research reports and stock ratings of the financial research department to make investment decisions.If a prominent investment bank decides that a technology company will outperform expectations over the next few years, the company's stock is bullish. At the end of 2004, the US Securities Regulatory Commission lifted the ban on the shares held by a group of founders and employees three months after Google went public. The circulation of Google's stock almost doubled, and the stock price dropped by 15% accordingly.At this time, Goldman Sachs published a research report, supporting Google, and raised Google's stock price expectations. Google's stock price soared 10% in the hours after the report was published, and successfully resolved the selling pressure brought about by the lifting of the ban on insider stocks.Relying on the substantial rise in stock price, Google attracted a large number of talents in a short period of time after listing, quickly launched a variety of services, and surpassed Yahoo to become the largest Internet company.There are many star companies in the eyes of Wall Street like Google, including Microsoft, Apple, RIM, which designs and manufactures BlackBerry, and Yahoo a few years ago.

Wall Street sets sales and earnings forecasts for each technology company.If a technology company can beat earnings estimates for multiple quarters in a row, Wall Street will desperately try to boost the company's stock price.Since the options of employees of technology companies account for a very large proportion of employees' income, whether a technology company's stock price can grow steadily determines the income and morale of the company's employees.During the Internet bubble era in 2000, the reason why Yahoo's emerging companies were able to block the attacks of IT giants such as Microsoft was largely due to Wall Street helping them maintain high stock prices.

Conversely, when a company fails to meet expectations, it may be severely suppressed by Wall Street.As a result, most tech companies have to set a lot of short-term goals in order to meet Wall Street's expectations every quarter, which is likely to affect their long-term development.In the eyes of discerning people, the short-sighted behavior of many technology companies is very unwise, but many of them have to do so under the pressure of Wall Street.Some companies have obviously failed to meet Wall Street's expectations, and can only quench their thirst by drinking poison through legal fraud.We mentioned in the first chapter "The Twilight of the Empire" that in order to meet the expectations of Wall Street, Lucent had to lend to companies that were unable to repay to buy its products in order to increase its turnover.Although its performance in a few quarters looks relatively good on the surface, once these borrowing companies go bankrupt, Lucent's payment for goods will never come back, so there are huge losses.In 2004 and 2005, Yahoo sold all of its Google shares at a low price and recorded it as a profit in order to make its financial statements beautiful.But when there were no more Google shares to sell, its profits plummeted, the company entered a recession, and its stock price fell.In this case, the heart of the company is slackened, and key employees leave faster than the company declines.

For those technology companies with little value, once they fail to meet expectations, Wall Street will relentlessly suppress them to the end, in order to play the role of killing chickens to show monkeys.A financial TV channel in the United States introduced such a story.In the United States, there is a well-known online sales company called Overstock, whose current annual turnover is about 800 million US dollars.It was listed on Nasdaq in 2003, and in the second quarter of 2005, its earnings were a penny or two per share less than Wall Street expected, but no one expected this small penny or two. Make Overstock almost suffered a catastrophe.Generally, Nasdaq companies announce their results after the market closes. As soon as the results come out, Wall Street immediately lowers its rating.On the second day, Overstock's stock plummeted, and in just a few days, Overstock's stock fell by more than half.Its CEO Patrick Bryne was furious and determined to investigate the matter.After investigation, he found that Overstock's stock was maliciously sold short, and the number of short-sold stocks was more than ten times the actual number of Overstock stocks.According to the regulations of the US Securities Regulatory Commission, it is allowed to mortgage a certain amount of cash to "borrow" stocks for short selling, but the sold stocks must be provided to those who buy the stocks within three days.Since the short-sold stocks are more than ten times the actual number of stocks, there must be someone who cannot borrow stocks and cannot deliver on time.In fact, those short sellers on Wall Street didn’t intend to deliver on time at all. Some of them couldn’t deliver after a week, and what’s more, they couldn’t deliver in the second year. In the end, these transactions had to be voided.Of course, Wall Street does not have to bear any responsibility.However, Overstock's stock price plummeted due to this short selling of more than ten times, and the company almost closed its doors.Wall Street has made huge profits by shorting the stock of a technology company at no cost.In this incident, Wall Street's rating companies suppressed Overstock first, and hedge funds maliciously sold it later, and the cooperation was seamless.It is not difficult for readers to see that the fate of small and medium-sized companies like Overstock is largely controlled by Wall Street.It can be said that Wall Street is using Overstock to kill chickens and show monkeys, punishing companies that fail to meet their expectations.Under such circumstances, no public technology company dares to sacrifice a few quarters of earnings in exchange for long-term development.

In order to continuously meet the expectations of Wall Street, almost all large multinational companies with more than half of the market share have to work hard to find new growth points.This is actually the fundamental reason why Microsoft must enter the Internet market because the software business is doing quite well.When looking for new growth points, many of these large multinational companies inevitably expand blindly, and finally turn from prosperity to decline because of too much investment and consumption.There are so many such examples that we will not list them all. So as long as a listed technology company is profitable, can it ignore Wall Street's suppression of its stock and focus on its long-term development?In fact, this is impossible, because neither technology companies nor individuals live in a vacuum.The only way to get out of Wall Street's influence is not to go public.This is why Google has been reluctant to go public long after it has made a profit.Some listed companies with great potential have been suppressed by Wall Street for a long time for some reason. At this time, the private equity foundation paid to take back all the company’s circulating shares and turn it into a private company. After packaging, it was re-listed. At this time, the new Companies often go from Wall Street pariahs to darlings.The famous computer hard disk company Seagate has gone through this process.