Simon had already begun establishing venture capital funds through various channels to seize opportunities in China's burgeoning internet sector. Hearing Chen Qing's plan, he simply nodded.
Keeping investments diversified across multiple avenues was a core principle of his. The existing venture capital funds operated under different companies, such as Westeros Company, Egret, and Cersei Capital, both within and outside the Westeros system. Adding another platform under Chen Qing's leadership wasn't excessive.
Chen Qing was well aware of her and Lin Su's roles, managing a small fraction of Simon's ventures in China. Their responsibilities constituted less than a tenth of Simon's entire strategy there. In truth, their roles were defined more by their personal relationships with Simon than by their professional contributions. Simon had never limited them but also didn't hold high expectations.
This wasn't enough for Chen Qing, though. She knew she needed to achieve substantial results if she wanted to break past this boundary.
Moving on, Chen Qing brought up the rapidly growing VCD industry in China. According to recent statistics, by last week, cumulative VCD shipments to the Greater China market had reached 5.23 million units. It was expected that first-half shipments for 1996 could exceed 6 million, and the full year might see sales hit 15 million, far surpassing the original projection of 10 million units.
As the sole supplier of video decoding chips for VCDs, Skopar had maintained a high net profit margin of around $15 per chip, even after successive price cuts to make VCDs more accessible and fend off potential competitors. Factoring in revenues from other components and licensing fees, Skopar's net profit for 1996 was projected to reach $300 million—more than Skopar's total revenue in 1995.
What was more astounding was Skopar's skyrocketing market value. Thanks to the VCD boom, the previously unremarkable video chip developer, which had a market value of just over $100 million before Westeros's acquisition, was now worth $16.3 billion on NASDAQ, with a price-to-earnings ratio of an astonishing 81.
This growth underscored the sheer frenzy surrounding the tech industry.
Westeros acquired over half of Skopar's shares last year for $94 million. Currently, the Westeros system holds a 47.7% stake, with Chen Qing and Lin Su each holding 2.65%, totaling 53% ownership. In a little over a year, their investment's value had increased to $8.639 billion, a 91-fold rise.
Chen Qing's share alone was now worth over $400 million.
Hugging Simon, she chuckled, "Four hundred million dollars, boss. I don't even know what to do with it all."
In China, there were few people with even a $4 million fortune, let alone $400 million.
Simon smiled, enjoying her warmth. "Don't get ahead of yourself. And remember, you pledged your shares last year. I trust you've cleared that up? Wouldn't want you to get overconfident and stumble."
Chen Qing nodded. "Yes, I'm grateful I only pledged the shares and didn't cash them out. Otherwise, I'd be regretting it now."
To buy Egret's stock last year, Chen Qing pledged her Skopar shares for a $20 million loan, which had proven profitable after Egret's stock surged. But Skopar's stock rose even more dramatically. To avoid complications, Chen Qing soon sold some Egret shares, paid off her debt, and redeemed her Skopar stock.
Looking back, Egret's value had tripled since its IPO, but Skopar's had risen more than tenfold.
Chen Qing was genuinely relieved she hadn't cashed out.
Initially, the temptation had been strong. Skopar's shares had quintupled in just six months, which already seemed high to her. Furthermore, Simon himself had been skeptical about Skopar's long-term outlook, while Egret had been more widely praised.
Egret's market value had soared from $100 billion at its IPO to $300 billion, a remarkable rise.
But Skopar was on a whole different level of volatility.
Due to its smaller size, Skopar's stock could be easily driven up by market speculation, helped along by its solid earnings and Westeros's reputation.
Chen Qing was keenly aware of how much her success relied on these connections. Without Simon's backing, her wealth could make her a target rather than a pillar of power.
It was a harsh reality, especially at the top.
Reflecting on the VCD boom, Simon understood it was happening faster than in his memory. Originally, VCD sales only hit tens of millions by 1997, but thanks to his influence, the timeline had accelerated. Meanwhile, international electronics giants, spurred by the VCD's success, had set aside their differences and fast-tracked the rollout of the DVD format.
With DVDs arriving sooner, a rapid rise and fall for VCDs was inevitable.
Thinking this over, Simon told Chen Qing, "Don't forget our previous conversations. It's time to start planning Skopar's transition or an exit strategy. My stake is large, so I'll need to proceed gradually, but your and Lin Su's stakes are below 5%. You're less restricted. I suggest you start selling off shares, don't hold out hoping for a peak. Greed rarely pays off."
Chen Qing nodded, taking his advice to heart. "By the end of the year, Skopar should be ready to ship DVD chips. Since you believe DVDs are the future, even if VCDs decline in Asia, we can still hold a place in the DVD market. That would keep Skopar's value steady. Also, we could use Skopar's overvalued stock for acquisitions, right?"
Simon paused, then smiled approvingly. "Looks like you've been paying attention to Wall Street."
Using inflated stock value as "currency" for acquisitions was a classic strategy. The most iconic example was AOL's acquisition of Time Warner during the tech bubble. After the merger, AOL's value plummeted by 90% as the bubble burst, reflecting AOL's real worth.
However, Time Warner, with its tangible media assets, retained substantial value. When AOL merged with Time Warner in a 55-45 share swap, AOL's shareholders effectively exchanged grossly overvalued shares for a significant stake in Time Warner's real assets.
Simply put, AOL shareholders traded their overvalued silver for gold, retaining solid assets when the bubble burst. Meanwhile, Time Warner shareholders found their holdings diluted by AOL's overvaluation, losing much of their asset's true worth.
Skopar's current market value wasn't entirely a bubble; it had a solid $300 million in net profit. However, with VCD's inevitable decline, this valuation was likely short-lived.
Since Simon couldn't liquidate quickly, using Skopar's stock to acquire another company would be ideal. Choosing the right target could be like exchanging inflated silver for real gold.
As they brainstormed targets, they realized it was too early to rush the acquisition. The VCD market would remain robust for at least two more years, so there was time to find the perfect opportunity.
Eventually, their conversation drifted to other topics, and before they knew it, it was late into the night.
The next day was Saturday.
As usual, Simon was up early, but Chen Qing, exhausted from the night, stayed in bed. After breakfast, Simon headed to Manhattan for a morning of meetings, then flew by helicopter to East Hampton for lunch with a mother-daughter pair staying at his residence there.
In the afternoon, he took a break.
Instead of visiting the nearby art troupe, he settled down in the villa's back porch to go over some scripts. One, in particular, caught his eye: Deep Rising, a screenplay by The Mummy director Stephen Sommers.
Simon knew this project well.
In the late 1990s, Disney's $45 million investment in Deep Rising had backfired when the film grossed barely over $10 million domestically.
In the late '90s, Disney had been plagued by internal turmoil, including the departure of Jeffrey Katzenberg and the firing of Michael Ovitz. Although Disney had acquired ABC, the company was far from its former glory, with CEO Michael Eisner's influence waning.
From 1995 to 2005, Disney's main success came from Pixar's 3D animated films.
Ironically, Pixar was not owned by Disney.
Disney's dependency on Pixar allowed the animation studio to grow significantly, siphoning resources away from Disney's own projects. This period also saw Disney make some costly missteps, like underselling The Sixth Sense. Due to skepticism about the film, Disney licensed it out, only retaining distribution rights. When the movie made $670 million worldwide, Disney missed out on most of the profits.
Remembering Disney's pitfalls, Simon took the time to reflect.
Daenerys Entertainment was thriving, but Simon knew he couldn't afford to be complacent.
Managing such a vast company meant constantly facing new challenges. Simon wanted to delegate more of Daenerys's operations, yet he also knew that if he let go too much, the media empire could spiral into internal conflicts, much like Time Warner did after Steve Ross's passing. Only by maintaining strong control could Simon keep the flat structure of Daenerys Entertainment cohesive and focused.
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