Episode 167
I reviewed the data from Kim Min-sik, licked my lips, and said, “The more I look at this, the more tempting it becomes.”
The financial statements and sales figures of these venture companies were absurd compared to their current market value.
One company had a measly annual revenue of 3 billion won, barely breaking even, and yet its market capitalization was over 6 billion won.
Considering that Daehoo Group, with 90 trillion won in annual sales, had a market capitalization of 45 trillion won, about half its revenue, this venture company’s market cap shouldn’t have been more than 2 billion won.
Under normal circumstances, I would have avoided it as a manipulated stock, but the problem was that this wasn’t an isolated case.
“All of them have a market cap that’s significantly higher than their revenue.”
And yet, my intuition was telling me there was money to be made.
Park Jong-bum, reviewing the data with me, stroked his chin. “It’s speculative investment, driven by the anticipation of future growth in the internet sector and the first-mover advantage.”
“Exactly. They’re not looking at the current situation, they’re betting on the future potential.”
The news and newspapers were filled with optimistic predictions about the internet, a new ecosystem connecting everyone.
New and innovative business models were emerging: online shopping, online communication, even getting paid for clicking on ads.
Venture companies were attracting investments with these promises and visions.
“It’s not a bad story. Online shopping would be convenient. No need to go out, lower prices due to reduced overhead costs…”
Despite the attractive investment opportunities, I was hesitant because of the warning signs from my intuition.
“Ugh, what should I do?”
“Their current sales might be low, but they have growth potential,” Park Jong-bum said cautiously. “Look at Golden Bank, for example. Advertisers pay them for clicks, and they share a portion of the revenue with the users. There are no manufacturing costs, it’s just advertising brokerage, so there’s no risk of loss. It seems like a safe investment.”
He was describing the perspective of a typical investor, and I agreed with him, but something felt wrong. “We’re not internet experts, it’s risky to invest blindly. I understand the concept of online shopping, but I don’t know how the system actually works or how much profit they’re making.”
Maru tilted his head. “Isn’t your specialty sensing money and danger? Just invest and pull out when you sense danger.”
I said incredulously, “If it were that simple, I wouldn’t have struggled for years in the junkyard business. I would have just played the stock market all day.”
My intuition was based on my experience. I couldn’t sense anything unless I was directly involved.
I had sensed the potential of IC chips because I had handled them myself, and I had sensed Wang Jin-hee’s potential because I had met her in person. And the more I learned about a particular field, the stronger my intuition became.
If I relied solely on my intuition, I would have to visit every single venture company and experience their business firsthand.
Chunha Group had grown rapidly, so our management team was thin, and the three of us were already overloaded with work. I couldn’t possibly visit every single venture company, especially since new ones were emerging daily.
And even if I found a promising company, I would have to monitor it constantly to detect the optimal time to withdraw the investment. It wasn’t feasible.
“This is a headache.”
Torn between the smell of money and the sense of danger, I finally made up my mind.
“Alright, let’s invest cautiously. How much surplus funds does Joongang Investment have?”
Maru checked the documents. “A little over 2 trillion won readily available.”
“Good. Let’s invest 500 billion won.”
“How?”
“125 billion won per week, in different companies, for four weeks. And if we make a profit in the first cycle, we withdraw the profit and reinvest the principal. How about that?”
Park Jong-bum said with a slightly disappointed expression, “It’s a safe strategy, but you’ll miss out on the potential gains if the stock prices soar. Withdrawing the profits will significantly reduce our overall return.”
For example, let’s assume the stock price increased sixfold in six months. My intuition was telling me the potential was that high.
If we invested 500 billion won and held onto it for six months, it would become 3 trillion won. But if we withdrew the profits every cycle, our total return would be less than 1 trillion won, even if the stock price increased sixfold. It was the difference between compound interest and simple interest.
Fortunately, my intuition’s resistance weakened after I decided on the gradual investment strategy.
“It doesn’t matter. We have too much to lose to gamble everything on uncertainty. If I were certain of a sixfold increase, I would even borrow money to invest. But who knows the future? We’ll just invest 500 billion won, the maximum amount I’m willing to lose without regret. And then we’ll forget about it and focus on our core businesses.”
Forget about it? Easier said than done.
Just two weeks after making that declaration, I couldn’t focus on anything else.
“This is insane.”
The initial investment of 125 billion won had become 185 billion won in just two weeks. And the second investment had already reached 250 billion won, a 90 billion won profit.
My previous boasts about my business acumen seemed ridiculous now.
“How high is this going to go?”
Unlike the manufacturing sector, still struggling from the IMF crisis, IT companies were enjoying an unprecedented boom, their stock prices soaring.
“At this rate, it’ll increase tenfold, not sixfold, in six months.”
The KOSDAQ index, which had been halved after the IMF crisis, had already recovered by 50%, driven solely by the IT sector’s growth.
“If I invest 1 trillion won for two weeks, I can make a 350 billion won profit.”
My past struggles, my relentless pursuit of profit through any means necessary, seemed pointless now.
And this was perfectly legal.
Was making money this easy?
Greed started creeping in. “Should I invest more?”
Joongang Investment Corporation had over 1.5 trillion won in surplus funds, even after deducting the planned investments.
And Chunha Group also had substantial cash reserves, so I could afford to invest another 500 billion won.
“If we double the cycle to 250 billion won per week… hmm!”
The feeling of unease returned, although not as strongly as before.
It was manageable. “Alright, I’ve decided.”
I called Kim Min-sik.
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Hello.
“It’s me.”
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Yes, CEO Baek. He answered respectfully.
“Let’s increase our IT investments.”
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Invest more, sir?
“Yes, double the cycle.”
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Double it…?
“We have plenty of surplus funds, so buy an additional 125 billion won worth of shares in each cycle.”
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So you want me to buy another 65 billion won worth of shares in the first cycle, which is currently at 185 billion won, bringing the total to 250 billion won?
“No, buy an additional 125 billion won at the current market price. So it’ll be 310 billion won in total.”
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…Are you sure, sir? That would bring our total investment to 1 trillion won.
I scoffed. “Do you think 1 trillion won is a lot of money for me? Just buy the shares. The price is going up as we speak.”
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Yes, sir.
I hung up the phone, my eyes bloodshot, staring at the stock chart, and muttered,
“Good, good. Keep going up.”
Two weeks later, the time had come to withdraw the first cycle of investments.
“400 billion won.”
The first cycle, which had started with 250 billion won (125 billion won + 125 billion won), was now at 400 billion won.
A 150 billion won profit in just one month.
The second cycle, which would be withdrawn next week, was currently at 340 billion won, almost a 100 billion won profit.
This was like printing money.
I should have withdrawn the 150 billion won profit and reinvested the 250 billion won principal, but I hesitated.
“If the profit margin is 50%, I make 200 billion won with a 400 billion won investment, but only 125 billion won with a 250 billion won investment. Hmm.”
The difference was significant.
Withdrawing the profit every cycle was the safest strategy, but I couldn’t shake the feeling that I was losing potential profits.
“I’m losing 75 billion won by withdrawing the profit.”
I opened the newspaper and scanned the headlines. “IT sector’s strong performance, a new future unfolds through the internet.” The so-called experts were all optimistic about the internet’s potential, and their words fueled my greed.
“Should I just hold onto it?”
The 1 trillion won was just surplus funds anyway. Joongang Investment could operate without it.
And as a businessman, how could I pass up such a lucrative opportunity?
“Let’s hold onto it until it reaches 2 trillion won. I’ll withdraw the 1 trillion won principal and keep the rest… Ugh!”
The unease returned.
For the first time, I felt resentment towards my intuition, which had always guided me in the right direction. “Are you sure it’s dangerous? The price keeps going up! Everyone, from the experts to the general public, is optimistic about its future. Of course, there might be a correction later, but it’ll still be worth over a trillion won, won’t it?”
Where else could I find such a profitable opportunity?
I had doubled my assets in a few months when I was still a small-time operator, but the growth rate had slowed down as my businesses grew. I had many successful ventures, but none as profitable as this.
“Should I wait a little longer? It’s not like I’m taking a huge risk. Just a little longer.”
As I was staring at the stock charts with bloodshot eyes, my phone rang.
“Hello?”
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Chairman, it’s Park Jong-bum.
“Yes, what is it?”
His voice was low and hesitant. – We have a problem at Chunha Trading.
“Chunha Trading?” It was my most stable business, monopolizing the electronic scrap and used goods market. – I’m sorry, sir.
“What happened?”
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We acquired some electronic scrap from a mid-sized electronics company recently, and it’s… I’m sorry, I should have been more careful.
“Explain. What’s wrong with the electronic scrap?”
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We bought defective P860 IC chips, thinking they could be refurbished and resold, but they’re unusable. Only about 10% are functional, the rest are scrap.
I frowned. “You didn’t inspect them? That’s basic procedure.”
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The transaction was only worth 300 million won, so I sent a sales representative… I’m sorry.
“What happened? Were the goods swapped? Or was the sales representative scammed?”
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We’re investigating the driver who transported the goods, the researcher who sampled the chips, and the sales representative.
“Wait for me. I’m coming over.”
I hung up the phone angrily. “Damn it, what’s going on?”
The 300 million won loss wasn’t the issue.
Park Jong-bum was handling all of Chunha Trading’s operations, so he couldn’t cover the field as well. And I couldn’t either.
We had established a system with clear manuals and procedures, focusing on management from above.
If it was just a lazy sales representative, we could just fire him. But if there was a flaw in our system, a loophole that allowed someone to manipulate it, we had to find it and fix it.
I was the one who had exploited such loopholes in other companies, after all.
I knew how dangerous they could be.
“I’ll be right there.”