They entered the back of the building.
Inside the doorway came rank odours: the yeasty smell of fresh semen, the stench of used cooking oil. The rooms were disorientatingly warren-like – improvised partitions, mattresses, makeshift latrines. Hell on earth. Shouting from somewhere – a Miranda warning? – translated into Eastern European or some such. A super-sized box of condoms, dropped, the distinctive wrappers spilling out. A computer terminal, which someone had hastily logged out of – the login page being for Surefar Enjoy. So right here was that physical-world meeting place, in its depressingly unoriginal guise. Right here, in the middle of the city.
Her head swam.
She followed Adam down a corridor into a far room. A young female ICE agent was retching into a scum-encrusted basin. Further inside the room, she saw Cindy and someone else tending to a young girl, glossy with perspiration, twitching violently. In the half-light the scene looked almost elegiac, like an old master’s painting. Except the girl had a gaping wound at the base of her neck, grey-white muscle tendon peering out.
Someone had tried to behead her.
CHAPTER 25
Monday, 3.30am and the lights of Carmichael Associates’ 36th floor dealing room blazed out into the San Francisco darkness. The surrounding office towers were lit unevenly at this hour, like King Kong himself had taken great bites out of them. Inside, seventy or so traders and salespeople helped themselves to urns of black coffee, platters of pastries, tureens of egg-white omelettes, breakfast meats, fresh bagels. These troops needed sustenance. Some had not woken up. Most had not been to sleep. For this was IPO day: the most exciting and miraculous event in the life of a West Coast technology investment bank. Modern capitalism too, come to that. By the time the NASDAQ opened, a new public company would be born, vast sums of money made, images beamed round the world of dealers staring entranced at their screens or hanging speechless on the ends of phones. It was new, economic life – with Carmichael Associates as the midwife.
Ben Silverman walked over to the assembling group with mixed feelings about it all. First and foremost was the death of Jon Vogel. Was it right to be holding this event so close to the passing of a founder-investor? Sure, the registration statement had been filed before his death was announced. Yet it still wasn’t sitting well with Ben.
It all seemed too sudden to him. Since the start, he’d argued for a lengthier, more thorough preparation period. For more meetings with potential investors, explaining (first understanding) the Clamor business story.
But perhaps they were right. Perhaps these older, savvier players had grasped far better the big picture – those mercurial market forces that dictated why and when certain companies ‘got out’, while other, possibly worthier ones never did.
In this ultra-high stakes game, market timing was everything.
He joined them at the podium: Carmichael, elevated like a general, flanked by his lieutenants Steven Schweitzer and Head of Equity Sales John Cavanaugh III. Cavanaugh ran the desks of sales people who, over the coming hours, would be responsible for placing the stock. It may be 3.30am here in San Francisco, but it was already the start of the working day in New York, late morning in London, lunchtime in Geneva and mid-afternoon in the Middle East. Those were where the deep pools of equity risk capital resided. Where the Carmichael boys (and girls) were going fishing with their baited hooks. Schweitz and Cavanaugh were wearing baseball caps bearing the Clamor logo. Leonard Carmichael, turned out in his charcoal grey suit, had refrained from such gimmickry. He was making a short yet portentous speech about the importance of this IPO to Carmichael Associates’ future as a leading independent investment bank able to hold its own in the big league, or something; frankly, it was all lost on the audience, who cared about one thing and one thing only.
And this one did promise monster-sized payouts. The seventy-five million in advisory and success fees was just the start of it. The IPO structure agreed with the client was called a firm commitment, book building exercise. Simply put, Carmichael Associates had agreed the prior evening to buy the entire issue for $93 a share or $2.325 billion. Their task now was to build a book of investors to whom they could resell the issue before the new stock started trading on the NASDAQ stock exchange at 09:30 eastern time – three hours later. The 7% spread between the $93 cost to Carmichael and the $100 anticipated resale price was where the bank started to make the real money: $175 million, on top of the other fees.
It was a curious thing, for an industry advocating such free market practices – to have this perfectly collusive arrangement, Ben reflected. It was just the going rate if you wanted to be led out by a top tier bank: seven per cent of the proceeds. Sure, bankers argued that they maximised proceeds for the client company – but a quarter-of-a-billion-bucks, for a few weeks’ work! And there was more. For Carmichael had also negotiated an Over-Allotment Option. They could cause the company to sell another 15% of the issue – another 3.75 million shares, at the $93 price. If the stock really started to run, to $150 say, then that right there could be worth another two hundred million dollars. It was stupendous.
For in the end, who knew? Who knew what this thing could do? What if the stock doubled like in the good old days? What if it went the way of Google? It was perfectly possible to imagine Carmichael Associates making a billion dollars from this IPO! It was a miracle of modern capitalism, a fabulous place in the economic sun. Ben couldn’t deny the exhilaration of it. There was something archetypically masculine, almost primeval about it: the hunt, roaming the corporate plains, bringing down the big game. Surely his dad had never experienced anything quite like it during his long career as a police detective. And he would probably never experience anything similar again, should he choose to go off and do something else.
Yet Ben felt odd about this billion-dollar possibility. Why? Certainly it wasn’t out-of-the ordinary for investment banks to turn that kind of profit on a single deal. Carmichael Associates was minting a fifteen billion dollar company – out of what, exactly? Out of bits, bytes, dorm room dreams… Then he saw it: something in the way Schweitz surreptitiously checked his BlackBerry while Carmichael held forth.
Carmichael was readying the bank for sale, Ben suddenly knew.
The old man was 68, had a bad ulcer and an heiress about to debut in a porn movie! Just how does a relationship with an only daughter go that badly wrong, Ben couldn’t help wonder… In any event, the bank would be valued as a multiple of profits. No vast multiple, as these bank trading profits were slippery as eels, but a multiple of at least four or five times profits. Which meant that a billion dollars of IPO windfall could in turn yield five billion in eventual proceeds to the bank’s owners.
Ben sipped his strong coffee, feeling a good jolt go through him.
Schweitzer’s piece of the action went way beyond an ordinary bonus or even profit sharing arrangement. Schweitz held a minority stake in the bank itself. A meaningful minority stake, if the rumor mills were to be believed. Supposedly, that was why he’d accepted the diminished title of Head of Technology. How Schweitzer hungered to join the billionaire’s club while still in his early forties, Ben sensed. Hell, he’d all but celebrated those predators circling with their fat wallets! What was his stake? – 10, 20%? This IPO could get him there on its own! Quite what he’d do with all that extra money Ben couldn’t imagine, but that was a problem he and his wife could solve –
Ben thought back to the sequence of events: to how dismissive Schweitz had been about dissident Jon Vogel in life and death, Yuri Malovich too... Come to think of it, why had Schweitz been so ready to recruit an outside consultant rather than try to work things through with Malovich, the then head of security? It all pointed to one question: just how far were Steven Schweitzer and Leonard Carmichael willing to go, to remove roadblocks from this IPO?
Still they had to shift up to 28.375 million shares at $100-plus each. In an era of stock market volatility, who could say what investors would actually do over the coming hours? It was
why investment banks so often chose to syndicate out share offerings. To diffuse the risk. But not this one. Why cut Goldman or J.P. Morgan in on the action, the internal discussion had gone? – Why give away that stupendous upside, when Carmichael had done so much to shape this opportunity? Carmichael’s award-winning economist was now expecting Monday’s Non-Farm Payroll numbers to handily beat expectations, evidencing a more robust economy then anticipated. Check. Also predicted by an in-house analyst: tech bell weathers Microsoft and Intel announcing stronger-than-expected earnings after the market closed Friday. Check! And then there was that ace-in-the-hole. Or rather the pivot. The nickname had come about when Schweitzer pointed out that the entire deal pivoted on one investor, Sheikh Yasan, who had committed to taking half the issue at full resale price. The transaction hadn’t gone through. The transaction couldn’t go through till the offer had been declared effective, but it was all but a done deal. Leonard Carmichael himself had made a ‘verbal handshake’ over the phone with the Sheikh. Check, check, check! A good day for the markets, a great day for the tech sector and as for Clamor – a blow out.
John Cavanaugh III swapped his Clamor cap for an old army cavalry hat as he was wont to do on such occasions.
“OK,” he twirled his forefinger above his head: “Mount up warriors. You know the drill. So start smiling and dialling! Let’s do this!”
“Fuck yeah!” someone hollered.
Clapping, whistling, chest bracing and girding broke out across the floor. Cavanaugh retreated to his glass office to monitor the fray. For this was now a war footing. And these men needed a little room to breath. To work off some aggression if need be. So long as it got results.
“Samuelson,” Ben heard Cav squawk one of the senior sales guys: “Is Constellation in or what? You working that one?”
“Sir, that deal is already closed – like a dooor!” And the ‘or’ of door soared! The Connecticut hedge fund had agreed to take a million at full price. One down, twenty four to go.
“Good, good,” Cavanaugh said, soothed. “Show ‘em how it’s done. This should be an exhibition game for you.”
Wanting to be in the middle of it all, Ben parked at an empty dealer’s terminal. He flipped his cell phone open and found the number for Serene Al’saran, the intelligent and measured Chief Investment Officer of Ensign. She was a Georgetown International Politics graduate and London Business School MBA. They’d established a good, easygoing relationship. He dialled and got through to her voicemail, leaving a message for her to call him. Barely had he finished when Cav beckoned him over:
“Spiderman, get in here,” Cav said in his patrician way. “What’s going on with your pivot guy? You M&A guys are killin’ me. We’re calling your boss.”
Cav’s phone rang first. Stay here, Cav motioned to Ben. It was the market strategist, calling with an update on how the European bourses had opened. A computer glitch in the oil market, a ‘phantom’ contract of some kind, had caused the price of Light Sweet Crude to rise and fall by four bucks. Though the price had ended up right back where it started, the glitch had spooked the commodities markets. Stock markets were trading nervously in consequence.
“The VIX volatility index is spiking. Asset-classes are re-correlating,” the strategist warned on speakerphone.
“Goddamit,” Cavanaugh growled.
“And there’s something else,” the strategist continued. “A news service has picked up accounts of unrest in the Iranian capital.”
“Who’s peddling this stuff?” Cavanaugh said, as though a worldwide conspiracy were fomenting against his stock sale.
“Reuters, sir,” the strategist said.
“So where are they getting their misinformation from?”
“From the dissidents themselves, sir. From the Clamor dot u s web site, actually.”
The upshot was that the Dow Jones and NASDAQ indices were expected to open down by a full percentage point.
Cavanaugh stared at his dealing screen. It was configured to show real time information on the share sale. Crawling across the bottom were order sizes and prices, cumulative shares sold, average price achieved and ‘Total Book Profit/Loss’. Leonard Carmichael, Ben knew, would be scrutinizing the exact same numbers on his rosewood-encased monitor – so too Steven Schweitzer, second-by-second.
After a promising start, the order sizes were getting smaller: 50,000 ... 100,000 ... 40,000 – as hedge funds and high growth investors nibbled rather than feasted on what the Carmichael team had set before them. The ‘price achieved’ was drifting down too: 98.875 ... 99.125 ... 98.5 ... In total, 2.341 millions shares – some ten percent of the issue – had now been placed, at an average price of $99.3. The softening price was less of a concern than the sales momentum, than creating an aura of invincibility around the issue, a supreme sense of confidence on the sales floor. For here was the front line. The place from where investors would take their cues, draw their inferences. From the tone of voice, the terms offered. It was just a variant on the age-old art of seduction: You want it, you can’t have it – but seeing who you are, perhaps we can work something out…
What did it mean, this oil glitch? The stuff about the streets of Tehran? – What did it mean for the pivot’s level of confidence? When would those magical numbers appear on the screen: 15,000,000 @ $100.00! … 15,000,000 @ $100.00! … 15,000,000 @ $100.00!
Cavanaugh ended the call with the strategist and hit speed-dial.
“Hey,” Schweitz crackled, on speaker.
“No news?” Cav said.
“He’s in a meeting, or taking a siesta, or something.”
“Probably with his harem. We should be callin’ him the pervert, not the pivot.”
“Yeh.”
“Spiderman’s in here with me. Can you boys tell me who’s eligible to make the call? The CIO?”
“Has to be him,” Schweitz said. “Promised he’d take care of it by close of business.”
“What time is it over there again?”
“Ten after four.”
“OK.”
The two men wrestled with the unsatisfactory-ness of the situation.
“John. You can stretch the budget, with the spot prizes for the sales guys an’ all.”
It was Schweitzer’s way of saying that something, anything, should be done to pull this issue along.
“I’ll take that under advisement, Steven,” Cavanaugh said, hanging up.
Back out on the floor, Ben’s phone rang.
“Hey Ben,” Winston Ma’s voice came on.
“Winston, what are you doing up at this hour?”
“Oh, you know me. The intern who never sleeps.”
“Hold on,” Ben said. There was a commotion at a neighboring desk – “I’ll call you right back.”
But it was just the usual antics of an area of the floor known as the Bull Pen. Bruce Battistuta, singing “Life in the Bike Lane” – a spoof of the Eagles song.
A young intern named Lance Dryden had just walked in, trying to make himself look as inconspicuous as possible. He was a slightly built Yale Economics major – a nice enough guy, Ben had concluded from a conversation with him, but not at all cut out for the rough and tumble of the trading floor. As well as being called Lance, on his first day, he’d placed a cycling helmet down on his desk. Bruce Battistuta had thrown it across the floor like a football. “No one sits at this desk without a respectable rig – meaning four wheels, fuck-head!” Hence, the reworking of Life in the Fast Lane – when not likening Dryden’s genitalia to the size and shape of a baby mushroom. ‘Shroom boy’ soon became his nickname. His internship at Carmichael Associates had turned into the worst ordeal of his life, he’d confided in Ben.
He was trying to focus on making a call, from a list he’d just been handed, when his neighbors looked up in unison, tracking Cav’s leisurely walk out onto the floor. Cav was doing that trademark finger-twirling thing. Only, this time, with a set of car keys.
“Listen up warriors! Prizes-time already. I hold in
my hand here the keys to a three-week old McLaren with less than fifty miles on the clock.” His wife had chosen the custom color – fuchsia – then changed her mind. Frankly, there were enough cars blocking the Cavanaughs’ driveway anyway.
“Next one to bag a seven-figure lot size drives it home tonight.”
The hum of calls resumed and intensified. Lance Dryden returned to dialling his number. Ben couldn’t help smile; somehow, he’d got himself caught up with the phone chord, his call inadvertently on speaker:
“Hi, this is the sales desk at, um, Carmichael Associates in San Francisco, calling about the Clamor Initial –”
“Yes, I ’ave been trying to call you!” a voice cut in. It sounded like Marc Bodin, the Chief Investment Officer of Firebird Growth – an ultra aggressive, Geneva-based hedge fund. “I want two.”
“I’m sorry?”
“Mee-lion! This call is being recorded, I know. Do not me screw up! I want two mee-lion shares.”
Dryden came off the phone with eyes popping. “Yes!” he pounded the desk, hard. “Yes!” He pounded it again. “Yes!” Thump. “Yes!” Thump –
“Jesus Christ Dryden, that last client thought I was calling from a Tijuana whorehouse,” Bruce Battistuta said, slamming down his phone. “And outstanding result for the desk by the way, you cock sucking son-of-a-bitch!”
“OK, at ease over there,” Cav squawked over them both. “And stop by after work young man, to arrange delivery of your new ride.”
Two million shares. A fourteen million dollar profit for the bank, and more than enough commission for Cavanaugh personally to cover the cost of a used McLaren. The appetite was out there. It was now two hours before the opening bell. Twenty percent of the book built. Firebird paying full price. If the pivot came in for 60% and they sold just another two, three million shares – hell, the old man would surely let the remaining stock ride, recapture some of that upside should the market turn back positive.
The Woman Who Stopped Traffic Page 19