Chapter 36: Shorting Stark
Leaving the Pharmacy, Ling Xiao subconsciously looked up at an apartment across the street, a cold sneer playing on his lips.
Those two unlucky fellows are probably still sleeping soundly now. Last night, Ling Xiao snuck into that apartment and gave each of them a small lesson, ensuring they'd suffer from backaches, sore legs, and leg cramps every day for the next few weeks.
After leaving the Pharmacy, Ling Xiao didn't go to meet Xiao Si; their agreed time was a bit later. What Ling Xiao really intended to do that morning was visit a stock brokerage firm on Wilshire Boulevard in Beverly Hills.
Wilshire Boulevard is where Beverly Hills' banks and commercial buildings are located, and the street boasts countless top-tier department stores.
The nearby Beverly Center is also a favorite among many celebrities, with nearly 190 specialty stores. Its appearance is quite unique, featuring transparent escalators on the exterior and a heavy rock restaurant as its two main characteristics. The temporary hospital in the movie "Volcano" was located here.
Earlier, when he was at home, Ling Xiao hadn't told Gan Jing the truth. He had actually invested 1.7 million usd in Stark Industries, but not by directly buying stocks for appreciation. Instead, he had shorted them.
The 1.4 million usd he had just gotten a few days ago, plus the more than 300,000 usd in private savings Ling Xiao had accumulated during this period, were all invested in shorting.
Stock shorting means that when an investor expects a certain stock to fall in the future, he sells shares he doesn't own at the current high price, then buys them back when the stock price drops to a certain level. The difference in price is the investor's profit.
Theoretically, it involves borrowing shares to sell, then buying them back to return. A regular short-selling market usually has a neutral platform that provides shares for borrowing.
In practice, it's somewhat similar to a credit transaction model in business. This model allows for profit during a downward price trend: first borrowing and selling at a high price, then buying back to return after the price has fallen. This way, the purchase is still at a low price, and the sale is still at a high price, just with the operational procedure reversed.
Although Ling Xiao didn't know how long Tony Stark had been kidnapped, Tony Stark announced the closure of all Stark Group's weapons divisions immediately upon his return.
For an arms company, this meant that its main businesses would be shut down, annual revenue and profits would fall, and its stock would naturally plummet. One could even say that a mere halving of its value would be considered very good luck for it.
With such foreknowledge, Ling Xiao knew exactly what to do. In one fell swoop, he invested all the money Gan Jing didn't know about.
Ling Xiao parked his car in an underground parking lot of a building. This time, no one was following him. Of course, it was also possible that his opponents were too skilled for Ling Xiao to detect. If they were truly such experts, they wouldn't need to follow Ling Xiao; they would simply act directly.
After locking his car, Ling Xiao took the elevator directly to the eighteenth floor of the building. Having made an appointment in advance, Ling Xiao went straight to his stockbroker's office, where the broker was also watching the news on TV.
"According to this station's correspondent in Afghanistan, the military has confirmed that Tony Stark, Chairman of Stark Industries Group, was attacked by terrorists yesterday afternoon in Afghanistan. It is reported that Tony Stark came to Afghanistan to demonstrate Stark Industries' Jericho missile to the military, and this major military procurement order, worth up to 2 billion usd, was the reason for Tony Stark's visit to Afghanistan."
"It has been confirmed that all fourteen US soldiers on the three Humvees escorting Stark have been killed. The bodies of the soldiers have been recovered, but Tony Stark's body has not yet been found, making it highly possible that he is still alive."
"Currently, no organization has claimed responsibility for the attack, and after the stock market opened this morning, Stark Industries' stock price has plummeted."
Seeing Ling Xiao enter, the middle-aged man who had been sitting in his office chair watching TV immediately stood up, walked out smiling, and while shaking Ling Xiao's hand, said, "Ling, your judgment this time was very accurate. Stark Industries' stock has indeed fallen sharply. You're probably going to make a hefty profit this time."
"Hello, James!" Ling Xiao smiled and shook hands with his stockbroker, James Dean, saying very modestly, "I just got lucky. By the way, how is the stock trend now?"
"Come, look over here." James Dean gestured for Ling Xiao to come to a computer and said to Ling Xiao, "You see, Stark Group's stock is already at 124 usd per share, and it has fallen to 104 usd per share, a drop of 16%, and it's still continuing to fall."
"Hmm!" Ling Xiao nodded lightly and asked in a low voice, "James, to what extent do you estimate Stark Industries' stock will fall?"
"That depends on how the situation develops," James Dean mused for a moment, then said, "If there's no news about Tony Stark for a long time, then Stark Group's company stock will likely fall by about 70%. After all, while Tony Stark is very important to Stark Industries, the true power holder of Stark Industries is actually the Group's CEO, Obadiah Stane. He is also the third-largest shareholder of Stark Industries. With him there, Stark Industries' stock won't fall that far. And..."
"And what?" Ling Xiao frowned slightly. He had a bad feeling.
"After Stark Industries' stock began to fall, I noticed someone was dumping a large amount of Stark Industries stock. Otherwise, with Obadiah Stane's methods, Stark Industries' stock wouldn't have fallen so quickly." James Dean's face showed a hint of worry. For traders like them, the most feared thing is a market shark that causes a bloodbath, which completely renders their previous judgments useless.
"Could that person be Obadiah Stane himself?" Ling Xiao murmured, stroking his chin.
"Obadiah Stane, why would it be Obadiah Stane?" James Dean looked at Ling Xiao with some surprise, frowned, and asked, "Ling, do you have some inside information? Otherwise, you wouldn't have grasped the precise timing of Stark Industries' stock decline so accurately?"
James Dean had reason to suspect Ling Xiao, because just three days ago, Ling Xiao had contacted him through a University of California, Los Angeles alumnus connection, asking him to help short Stark Industries' stock.
At that time, the market was very optimistic about Stark Industries' stock, as Stark Industries was very likely to secure a nearly 2 billion usd military order from the Department of Defense. And at this time, Ling Xiao came knocking, directly requesting to short Stark Industries' stock, which was very interesting!
As an alumnus, James Dean, a graduate of the Anderson School of Management, tried to dissuade Ling Xiao a few times. Seeing that he was still so stubborn, he could only agree to his request, after all, whether Ling Xiao made a profit or a loss, his commission from this business would remain unchanged.
But now it seems there's something fishy. In three days, a change occurred: Tony Stark was captured in Afghanistan, Stark Industries' stock plummeted, and coupled with Ling Xiao's suspicion of Obadiah Stane just now, James Dean couldn't help but have such a conjecture.
"What inside information could I have?" Ling Xiao smiled lightly and said calmly, "James, I'm just a small businessman who runs a Pharmacy. This time, I even mortgaged my house to raise this sum of money. As for the inside information you mentioned, I don't have any. I was just betting that Stark Industries wouldn't get the order from the Department of Defense. After all, although Stark Industries' military equipment is of good quality, the prices are generally high, and the Department of Defense might not necessarily purchase their group's military equipment. Plus, with Hammer Group stirring up trouble on the side, such a thing isn't impossible."
"Is that so?" Hearing Ling Xiao say this, James Dean's tone softened. After all, Ling Xiao's explanation was also very reasonable, and taking a gamble at this time was normal.
Thinking of this, he couldn't help but smile. What was wrong with him? He had investigated Ling Xiao's background; he was just an ordinary junior college student. What kind of methods could he have to get such inside information? He was being overly suspicious.