Pacitalia
25-01-2006, 02:14
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do not necessarily reflect the opinions of the employees or
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The Iceberg That Sank Portland Iron Works
Dr. Garret Jackson, a PhD economist with his doctorate from Hillcrest University, is the former Minister of Trade and Industry for the United Kingdom of Azazia, (2000-5) and currently serves as a financial consultant for former Prime Minister of the United Kingdom, Lord Alistair Tetley of Salisbury.
IMPERIUM and SALISBURY
In the world of global high-finance, dabbling in the markets produces only two types of companies: winners and losers; however if the recent economic crisis in Space Union has taught us financiers and economic theorists, there can also be a third class: the globally big losers, in this case Portland Iron Works. After the collapse of the Space Union economy, the new government of Federate Satpul Singh opened the nation to foreign investment in an effort to revitalize an economy in shambles. Enter Portland Iron Works, unquestionably one of the largest corporate conglomerates in the world with a bottom line that surpasses that of many small nations. Despite its humble beginning and shrewd business moves that started the shipbuilder on its path to international success, the company’s performance in the Space Union buyer’s market has been far from stellar and might very well be the first signal to international investors that someone is asleep at the helm and the ship is steering dangerously close to some rocky shoals.
As one of the premier shipbuilders in the world, Portland Iron Works had an appropriate and keen interest in gobbling up a smaller competitor in a market that has proven quite friendly to PIW in past years. Not long ago, Space Union’s largest and most successful domestic shipbuilder was purchased by Portland Iron Works at a time when the Unionist economy continued faithfully ever onward until the recession shook that very faith. Now, Portland Iron Works has used the shattered economy to add to its conglomeration of smaller shipbuilders but the question on the minds of shareholders throughout the world is: was it worth it?
Before bidding began, the Manston Naval Works had been traded openly on the market and had found an equitable price of $40/share, a respectable amount for any manufacturer in a world where most high-tech, high-wealth nations have grown beyond their manufacturing capacity. The first bid for the Unionist shipbuilder came from Republican Incorporated Systems at a fair value, that of the market’s price of slightly over $2 billion. Confederate Arms, based in Spizania offered next at $3.1 billion for the 51% majority stake in MNW, an offer that equates to slightly over $60/share – an offer that is 150% the market value of the stock, a rather substantial offer. Imperial Praetonian Shipyards, another top-tier international shipbuilder, entered the bidding contest and proposed a $4.1 billion deal that amounts to over $79.5/share – nearly 200% the market value of the stock in question. Confederate Arms raised their bid by one billion dollars before Portland Iron Works entered the fray with a $20 billion bid that equates to an astounding $388.25 price per single share of stock in Manston Naval Works, an amount that is a truly staggering 970% over the market value. At that point, the bidding war for the shipbuilder blossomed into the proverbial war of who has the bigger… ruler for measuring the stretch of their dollars. The bids went from 20 40 billion dollars within four bids and shortly afterwards hit the first triple digit billion bid, a whopping $125 billion from Consolidated Arms – not PIW it should be mentioned. However, after a $75 billion raise from leading Pacitalian shipbuilder Marinoceta SpA the Portland Iron Works returned with a $250 billion bid that set the bidding off in earnest. What the world markets witnessed was the rise of the Richie Rich’s of the corporate world waving around their bank accounts without the slightest concern for either their stockholders or the markets in which they trade. Portland Iron Work’s initial $20 billion bid held the value of Manston Naval Works’ stock at nearly 1000% percent of its original value; yes, that’s right readers, three zeroes behind that one. One thousand percent. And at 20 billion dollars that was far below the near one trillion bids the later stages of the auction saw.
The problem inherent in such reckless bidding is that the market is far fairer, and far colder, arbiter of prices despite any attempt by companies such as Portland Iron Works to alter the basic model of supply and demand. With the final amount of money bid on the MNW, Portland Iron Works was required to invest that much of its financial capital into a stock worth significantly less. Yet the free market ultimately must correct itself if it is to serve its function in the efficient fashion it demands and so in a short period of time the world will witness the collapse of the artificially inflated price of MNW and having tied such an enormous amount of their financial assets to the purchase, Portland Iron Works will be posting a significant loss that will be born by the individual stockholders of PIW be them businesses or individuals. Alternatively, savvy investors will recognise this gross miscalculation and will promptly begin selling their shares in both MNW and PIW to collect whatever profit they can recoup and as is so often the case in the marketplace, where one jittery investor leads, hundreds if not thousands and millions will follow leading to an ultimate depression in the value of not just MNW stock, but also in PIW stock. Truly frightening for the average investor is not that the investment strategists of Portland Iron Works allowed this, but that they actively encouraged it through their outlandish increments in the bidding process that saw bid increments in the range of one hundred billion, nearly 15 times the value of the whole company – approximately $4 billion.
Another aspect of the deal comes from the fact that PIW involved itself in another bid that substantially overvalued the purchased stock, that of Gerdiv Uranium Mining Corporation. It should be noted that although this deal was cosponsored by Memphis Mining Corporation many financial experts anticipate the announcement that Portland Iron Works provided the majority of the financing, a business move common to PIW as it has performed a similar function on several other occasions. However, the key aspect of the arrangement is that PIW in this bid is nonetheless attempting to diversify its holdings by purchasing a primary sector company that provides uranium to the world market. Nobody doubts that a constant and reliable supply of uranium is of the utmost importance to a company that builds nuclear-powered warships; however, until we see PIW obtaining companies that refine and process that uranium as well as other companies that can ship that uranium there seems a logical gap in the diversity of PIW’s holdings, a gap that investors should be wary of as it may not turn a profit for quite some time until PIW can incorporate the necessary infrastructure companies into its conglomeration.
And if it could get any worse for PIW's interests and image, the Sarzonian giant soon retracted their bid after a counter-offer from Guffingfordii interests in the range of an astounding $1.34 trillion, citing their doubt that Guffingford corporations could handle a transaction of that breadth, and that they would not engage in bid competition with a nation whose political system was "unfavourable" to their state's interests. This blatant form of economic bullying on the part of PIW should be treated as completely unacceptable by the Space Union federate. By forcing the Guffingfordii bidders to take a company for that price simply because their government system is unfavourable is quite possibly one of the lowest, dirtiest moves a company could pull in a bidding war. Withdrawing is one thing; the methods PIW used to do so were inadequate and could perhaps cancel out any Sarzonian hope of tying the Pacitalian economic arm behind the latter's back on this past November's Pomentane Ballistics debacle, in which they allege the Pacitalians elected to use "economic dirty pool" to come out on top of a trade dispute. If this is not economic dirty pool and a cheap shot to competition-driven capitalism, what is? The PIW withdrawal from the bid will only serve to show more chinks in a suit of armour many once thought was impenetrable; a corporation they thought was unbeatable. Now it looks simply untenable.
In and of itself, the problems we see in Portland Iron Works are simply that, problems in their finance and investment departments. If not for the international scope of the company, not to mention the human scope of the story in terms of private investors, the mistakes would be near comical. One must think of the many employees PIW will have to let go in order to soften the blow from the massive one-shot absorption of wasted capital. Where are all these workers going to go? Not somewhere else in Sarzonia - conveniently enough, Sarzonian arms manufacturing industry is pretty much under the control of Portland Iron Works anyway. In a short time, we may be witnessing the largest-ever mass exodus of skilled workforce to other countries with competitive industries. And who could say otherwise? For these employees, they may have only two options - leave Sarzonia as said above (a hard task, certainly), or become unemployed and live off welfare (a humiliating task and a waste of labour). The strain on Sarzonia's welfare system will be immense, intensified by a sudden spike in unemployment.
PIW occupies one of those truly rare positions in the world as a mover and shaker with enough clout to affect not just the Sarzonian government and economy but the world as a whole. A collapse in the stock value of PIW, a distinct and terrifying possibility as outlined above, would cripple the Sarzonian economy as a significant portion of its GDP is directly linked to the fiscal health of PIW. The crippling of the Sarzonian economy would reverberate in international markets although it would have far from a permanent or even temporarily sustained deleterious effect. Fortunately, a collapse of the Sarzonian economy would be a stumble for other world markets and not the cause of a world-wide collapse; instead we would witness strain on the closest allies of Sarzonia for the duration of the time that it would take them to rebuild their economy – something many economists theorise is only possible by reducing the link between Sarzonian economic output and that of Portland Iron Works. Financial institutions in other countries are certain to downgrade the stock value of PIW, even its credit rating. Relying on other economic superpowers like Hamptonshire, Pacitalia and Praetonia to supply capital to push the Sarzonian economy back above the surface would be unacceptable for a great many, but it may be necessary. And, if not unacceptable, it would still be a huge blow to Sarzonian prestige and pride. Regardless, any route taken from this point on is a route that will most probably sound a further death knell for PIW.
In short, the world has witnessed the turning of a corner for Portland Iron Works, from globe-striding conglomerate that can do no wrong to one that makes massive financial blunders in rather rapid succession. There seems to be no navigator on what is one of the world’s largest bridges and myself and many other economists remain nervous about the now uncertain future of both Portland Iron Works and the nation of Sarzonia as a whole. While the future remains a blank canvas, it is becoming readily apparent that the formerly bright titanium white coating has aged into a foggy gunship grey.
do not necessarily reflect the opinions of the employees or
administration of The Economist magazine. All material is
strictly their property and word.
http://kfox.gamehorizons.net/economist.jpg
The Iceberg That Sank Portland Iron Works
Dr. Garret Jackson, a PhD economist with his doctorate from Hillcrest University, is the former Minister of Trade and Industry for the United Kingdom of Azazia, (2000-5) and currently serves as a financial consultant for former Prime Minister of the United Kingdom, Lord Alistair Tetley of Salisbury.
IMPERIUM and SALISBURY
In the world of global high-finance, dabbling in the markets produces only two types of companies: winners and losers; however if the recent economic crisis in Space Union has taught us financiers and economic theorists, there can also be a third class: the globally big losers, in this case Portland Iron Works. After the collapse of the Space Union economy, the new government of Federate Satpul Singh opened the nation to foreign investment in an effort to revitalize an economy in shambles. Enter Portland Iron Works, unquestionably one of the largest corporate conglomerates in the world with a bottom line that surpasses that of many small nations. Despite its humble beginning and shrewd business moves that started the shipbuilder on its path to international success, the company’s performance in the Space Union buyer’s market has been far from stellar and might very well be the first signal to international investors that someone is asleep at the helm and the ship is steering dangerously close to some rocky shoals.
As one of the premier shipbuilders in the world, Portland Iron Works had an appropriate and keen interest in gobbling up a smaller competitor in a market that has proven quite friendly to PIW in past years. Not long ago, Space Union’s largest and most successful domestic shipbuilder was purchased by Portland Iron Works at a time when the Unionist economy continued faithfully ever onward until the recession shook that very faith. Now, Portland Iron Works has used the shattered economy to add to its conglomeration of smaller shipbuilders but the question on the minds of shareholders throughout the world is: was it worth it?
Before bidding began, the Manston Naval Works had been traded openly on the market and had found an equitable price of $40/share, a respectable amount for any manufacturer in a world where most high-tech, high-wealth nations have grown beyond their manufacturing capacity. The first bid for the Unionist shipbuilder came from Republican Incorporated Systems at a fair value, that of the market’s price of slightly over $2 billion. Confederate Arms, based in Spizania offered next at $3.1 billion for the 51% majority stake in MNW, an offer that equates to slightly over $60/share – an offer that is 150% the market value of the stock, a rather substantial offer. Imperial Praetonian Shipyards, another top-tier international shipbuilder, entered the bidding contest and proposed a $4.1 billion deal that amounts to over $79.5/share – nearly 200% the market value of the stock in question. Confederate Arms raised their bid by one billion dollars before Portland Iron Works entered the fray with a $20 billion bid that equates to an astounding $388.25 price per single share of stock in Manston Naval Works, an amount that is a truly staggering 970% over the market value. At that point, the bidding war for the shipbuilder blossomed into the proverbial war of who has the bigger… ruler for measuring the stretch of their dollars. The bids went from 20 40 billion dollars within four bids and shortly afterwards hit the first triple digit billion bid, a whopping $125 billion from Consolidated Arms – not PIW it should be mentioned. However, after a $75 billion raise from leading Pacitalian shipbuilder Marinoceta SpA the Portland Iron Works returned with a $250 billion bid that set the bidding off in earnest. What the world markets witnessed was the rise of the Richie Rich’s of the corporate world waving around their bank accounts without the slightest concern for either their stockholders or the markets in which they trade. Portland Iron Work’s initial $20 billion bid held the value of Manston Naval Works’ stock at nearly 1000% percent of its original value; yes, that’s right readers, three zeroes behind that one. One thousand percent. And at 20 billion dollars that was far below the near one trillion bids the later stages of the auction saw.
The problem inherent in such reckless bidding is that the market is far fairer, and far colder, arbiter of prices despite any attempt by companies such as Portland Iron Works to alter the basic model of supply and demand. With the final amount of money bid on the MNW, Portland Iron Works was required to invest that much of its financial capital into a stock worth significantly less. Yet the free market ultimately must correct itself if it is to serve its function in the efficient fashion it demands and so in a short period of time the world will witness the collapse of the artificially inflated price of MNW and having tied such an enormous amount of their financial assets to the purchase, Portland Iron Works will be posting a significant loss that will be born by the individual stockholders of PIW be them businesses or individuals. Alternatively, savvy investors will recognise this gross miscalculation and will promptly begin selling their shares in both MNW and PIW to collect whatever profit they can recoup and as is so often the case in the marketplace, where one jittery investor leads, hundreds if not thousands and millions will follow leading to an ultimate depression in the value of not just MNW stock, but also in PIW stock. Truly frightening for the average investor is not that the investment strategists of Portland Iron Works allowed this, but that they actively encouraged it through their outlandish increments in the bidding process that saw bid increments in the range of one hundred billion, nearly 15 times the value of the whole company – approximately $4 billion.
Another aspect of the deal comes from the fact that PIW involved itself in another bid that substantially overvalued the purchased stock, that of Gerdiv Uranium Mining Corporation. It should be noted that although this deal was cosponsored by Memphis Mining Corporation many financial experts anticipate the announcement that Portland Iron Works provided the majority of the financing, a business move common to PIW as it has performed a similar function on several other occasions. However, the key aspect of the arrangement is that PIW in this bid is nonetheless attempting to diversify its holdings by purchasing a primary sector company that provides uranium to the world market. Nobody doubts that a constant and reliable supply of uranium is of the utmost importance to a company that builds nuclear-powered warships; however, until we see PIW obtaining companies that refine and process that uranium as well as other companies that can ship that uranium there seems a logical gap in the diversity of PIW’s holdings, a gap that investors should be wary of as it may not turn a profit for quite some time until PIW can incorporate the necessary infrastructure companies into its conglomeration.
And if it could get any worse for PIW's interests and image, the Sarzonian giant soon retracted their bid after a counter-offer from Guffingfordii interests in the range of an astounding $1.34 trillion, citing their doubt that Guffingford corporations could handle a transaction of that breadth, and that they would not engage in bid competition with a nation whose political system was "unfavourable" to their state's interests. This blatant form of economic bullying on the part of PIW should be treated as completely unacceptable by the Space Union federate. By forcing the Guffingfordii bidders to take a company for that price simply because their government system is unfavourable is quite possibly one of the lowest, dirtiest moves a company could pull in a bidding war. Withdrawing is one thing; the methods PIW used to do so were inadequate and could perhaps cancel out any Sarzonian hope of tying the Pacitalian economic arm behind the latter's back on this past November's Pomentane Ballistics debacle, in which they allege the Pacitalians elected to use "economic dirty pool" to come out on top of a trade dispute. If this is not economic dirty pool and a cheap shot to competition-driven capitalism, what is? The PIW withdrawal from the bid will only serve to show more chinks in a suit of armour many once thought was impenetrable; a corporation they thought was unbeatable. Now it looks simply untenable.
In and of itself, the problems we see in Portland Iron Works are simply that, problems in their finance and investment departments. If not for the international scope of the company, not to mention the human scope of the story in terms of private investors, the mistakes would be near comical. One must think of the many employees PIW will have to let go in order to soften the blow from the massive one-shot absorption of wasted capital. Where are all these workers going to go? Not somewhere else in Sarzonia - conveniently enough, Sarzonian arms manufacturing industry is pretty much under the control of Portland Iron Works anyway. In a short time, we may be witnessing the largest-ever mass exodus of skilled workforce to other countries with competitive industries. And who could say otherwise? For these employees, they may have only two options - leave Sarzonia as said above (a hard task, certainly), or become unemployed and live off welfare (a humiliating task and a waste of labour). The strain on Sarzonia's welfare system will be immense, intensified by a sudden spike in unemployment.
PIW occupies one of those truly rare positions in the world as a mover and shaker with enough clout to affect not just the Sarzonian government and economy but the world as a whole. A collapse in the stock value of PIW, a distinct and terrifying possibility as outlined above, would cripple the Sarzonian economy as a significant portion of its GDP is directly linked to the fiscal health of PIW. The crippling of the Sarzonian economy would reverberate in international markets although it would have far from a permanent or even temporarily sustained deleterious effect. Fortunately, a collapse of the Sarzonian economy would be a stumble for other world markets and not the cause of a world-wide collapse; instead we would witness strain on the closest allies of Sarzonia for the duration of the time that it would take them to rebuild their economy – something many economists theorise is only possible by reducing the link between Sarzonian economic output and that of Portland Iron Works. Financial institutions in other countries are certain to downgrade the stock value of PIW, even its credit rating. Relying on other economic superpowers like Hamptonshire, Pacitalia and Praetonia to supply capital to push the Sarzonian economy back above the surface would be unacceptable for a great many, but it may be necessary. And, if not unacceptable, it would still be a huge blow to Sarzonian prestige and pride. Regardless, any route taken from this point on is a route that will most probably sound a further death knell for PIW.
In short, the world has witnessed the turning of a corner for Portland Iron Works, from globe-striding conglomerate that can do no wrong to one that makes massive financial blunders in rather rapid succession. There seems to be no navigator on what is one of the world’s largest bridges and myself and many other economists remain nervous about the now uncertain future of both Portland Iron Works and the nation of Sarzonia as a whole. While the future remains a blank canvas, it is becoming readily apparent that the formerly bright titanium white coating has aged into a foggy gunship grey.