"Agree to it, give him a $50 million valuation!" Dr. Cooper finally called his vice president.
"Doctor, this is a bit too much... this is really difficult to do, there are too many problems here!" the vice president said reluctantly.
"I know what you're worried about. I'm asking you to agree to his valuation, not to actually do it according to this valuation. We need to get oo networks' financial statements at the very least, and figure out oo networks' financial data. Whether we agree or not will be up to us then?"
"And if we fail, we can just report this valuation to the committee, and it won't be our responsibility whether the committee approves it or not!" Dr. Cooper said.
"Yes!" The vice president finally realized. Indeed, after Goldman Sachs agreed, the entire process proceeded very smoothly. Goldman Sachs also finally obtained oo networks' financial data, and this data was sent to Dr. Cooper immediately.
"The cash flow for the entire year of 2007 has actually reached $200 billion, of which the gaming industry alone reached $130 billion, which is $30 billion higher than our estimate. Moreover, oo networks' self-operated game businesses generated $26 billion in revenue, with Blizzard's annual revenue actually exceeding $12 billion, and World of Warcraft alone generated over $8 billion in revenue globally!" Looking at the financial data in his hands, even Dr. Cooper's expression was filled with disbelief.
This was because these figures were more than 50% higher than Goldman Sachs' own estimates, and after deducting operating costs, oo networks' annual profit from gaming alone exceeded $280 billion.
If the advertising revenue from Facebook and the online advertising alliance were added, then oo networks' profit would reach $40 billion. If this were the case, then oo networks' valuation of $500 billion at a price-to-earnings ratio of 13 times would not be unacceptable.
"Is this result real and credible?" Although he knew that Jiangnan Group would not falsify such matters, Dr. Cooper couldn't help but ask.
"We're not sure yet. Our financial auditing team has already entered the other party's finance department and started auditing all financial data! However, based on the initial results, there are no problems with the financials. The bank statements match, and we've also found some gaming companies that we have relationships with to secretly investigate their financial data, as well as the most important dividends from oo networks. All financial data matches, and we haven't found any evidence of financial fraud!" the vice president said.
"Then this is troublesome!" Dr. Cooper rubbed his temples with a headache, realizing he had fallen into a dire and difficult situation.
Dr. Cooper's original plan was to agree to the valuation first, and after obtaining the specific financial data, he would then use various means to force Jiangnan Group to lower the valuation.
However, he never expected that oo networks' financial data would be so terrifying and robust. With the year 2007 not yet over, its annual profit had already reached $40 billion. This level of profitability was already on par with ExxonMobil's, the world's leading operating capability.
So, what is the market capitalization of ExxonMobil?
Currently, this company's market capitalization is $525 billion, making it the highest valued company in the world. After all, they reported a profit of $40 billion last year. xxs
From this perspective, it seems that oo networks' valuation of $500 billion is perfectly reasonable.
But the problem is, ExxonMobil's $525 billion valuation is a price that all shareholders have accepted after countless market fluctuations and fierce competition among investors.
Why should a new company, right from the start, demand a valuation of $500 billion? How many people would be willing to spend so much money to hold its shares?
Also, according to Dr. Cooper's original plan, Goldman Sachs was to acquire at least 20% of oo networks' shares through various means. Goldman Sachs thought it would cost at most $20 to $30 billion to achieve this goal.
But now, it seems that Goldman Sachs would need to mobilize over $100 billion to acquire such a large stake, a figure that is even somewhat beyond Goldman Sachs' capabilities.
"So, should we still refuse?" Dr. Cooper pinched his temples. Of course, he wanted to continue suppressing the price, but the problem was that since he had decided to agree to the $500 billion valuation, unless Jiangnan Group agreed to a price reduction, Goldman Sachs would have to report it to the Federal Securities Management Commission at the $500 billion valuation.
Of course, Goldman Sachs could fully utilize its influence to prevent the Federal Securities Management Commission from approving this IPO plan. In that case, it would not constitute a breach of contract by Goldman Sachs, and both parties would simply go their separate ways.
But the problem was, if they parted ways, then the opportunity that Goldman Sachs had fought so hard to gain to invest in oo networks would be gone. It would never have such a good opportunity to enter Jiangnan Group again.
If Goldman Sachs failed, other institutions would be willing to take over. After all, with an annual profit of $40 billion, once this data was released, all the wolves in the world would likely flock to the scent of money. Then Goldman Sachs would have no reason to interfere.
And most importantly, Dr. Cooper was over 80% sure that even if oo networks were to list at a market capitalization of $500 billion, its stock price might still skyrocket after listing.
Why was he so confident?
The reason lay with ExxonMobil.
As mentioned earlier, the most valuable company in the world at present is ExxonMobil, and the reason it has reached a staggering market capitalization of $525 billion is that its net profit in fiscal year 2006 was as high as $40 billion, an unprecedented profit.
This achievement caused ExxonMobil's market capitalization to soar by $30 billion on the day the financial report was released, and it continued to rise every day, reaching $525 billion by now.
In other words, ExxonMobil's current market price is entirely supported by last year's oil price increase and profits, especially since oil prices rose from over $60 per barrel to over $90 per barrel in 2006, and this year they have even surpassed the $100 mark. It seems everyone believes that ExxonMobil can continue to be profitable this year.
But this is just an assumption. A small group of people know that ExxonMobil has actually encountered big trouble. Although ExxonMobil's financial reports for the first and second quarters of this year both show profitability, with combined profits exceeding $15 billion,
If the third quarter also brings in $15 billion, then the minimum would be $30 billion. If they manage to achieve last year's miracle of $40 billion, it's not impossible.
However, even though the third quarter has passed, their financial reports are due to be released by the end of December according to regulations. But this third-quarter financial report is already in the hands of Goldman Sachs.
And the bad news is that in the entire third quarter, ExxonMobil not only did not make a profit but lost $2 billion.
It's not that ExxonMobil's operational status has encountered a major crisis, changing from billions in profit to a loss of $2 billion in the blink of an eye. In fact, ExxonMobil is operating normally, with revenue from operations virtually unchanged from previous quarters.
So why exactly did a $2 billion huge loss occur in the third quarter?
The root cause ultimately still falls on Goldman Sachs, because the financial reports for all four quarters of 2006 and the first two quarters of 2007 used accounting techniques.
Some might wonder, aren't financial reports just real statistical data? How can such rigid things involve any accounting techniques?
Well, in reality, accounting is the most technical thing in the world. Even without altering any financial data, skilled accounting firms or financial personnel can, through certain methods, transfer this year's losses to next year or last year, and transfer last year's and next year's losses to this year.
For example, suppose ExxonMobil needed to pay $10 billion in wages to all employees in the second quarter of 2007, but due to a slight issue with the payroll system, ExxonMobil decided to postpone salary payments by 15 days.
Then this $10 billion cost would be transferred from the second quarter to the third quarter, and ExxonMobil would directly have an additional $10 billion in profit in the second quarter.
Of course, using employee salaries as a means is the most rudimentary and least clever method, and it can only defer for about one quarter. Goldman Sachs would not use such a low-level tactic.
Their most common method is actually acquisition. For example, ExxonMobil acquired an oil field in the first quarter of 2007 for as much as $60 billion.
With an agreement that this $60 billion could be paid one year later, meaning it could be paid in the first quarter of 2008, wouldn't ExxonMobil instantly have an additional $60 billion in profit?
Well, it's pretty much like that.
This kind of method is second nature to Goldman Sachs, and it can even be applied to countries. For example, a country that is about to join the European Union now has a fiscal surplus of tens of billions of euros for the entire year, making it an economically perfect country.
Who would have thought that this country would be mired in severe economic turmoil for the next 10 years, triggering a major crisis in the entire EU, and leading to events like Brexit in the future?
This is the art of accounting.
This accounting for ExxonMobil was done by Goldman Sachs. Last year's $40 billion profit was achieved by Goldman Sachs shifting funds from 2005 and 2007, while also transferring some of that year's costs to 2007.
All profits and costs are not created out of thin air, nor do they disappear into thin air. Ultimately, all of these will converge in the third and fourth quarters of 2007, leading to substantial losses for ExxonMobil in both the third and fourth quarters.
One can imagine the terrifying stock price plunge that ExxonMobil's stock will experience, with a drop to around $200 billion being quite normal.
However, none of this has anything to do with Goldman Sachs, because Goldman Sachs' investment in ExxonMobil stock had already ended. Goldman Sachs made a net profit of over $8 billion from this investment. Otherwise, why would Goldman Sachs go to such lengths to do the accounting for ExxonMobil? Everyone is in it for the money!
So, when ExxonMobil loses more than $200 billion in market value, and at this time, there is a company with similar profits of $40 billion, which is not in a declining traditional energy industry, but in a vibrant internet industry, don't you think that $200 billion might eventually fall into the hands of the latter?
Allowing its stock price to break through a market capitalization of $700 billion?
Especially after being manipulated by Goldman Sachs itself?
Dr. Cooper was full of anticipation for this!