Chapter 844 - Private Equity Fund (PEF) Company (2) – Part 1
Chapter 844: Private Equity Fund (PEF) Company (2) – Part 1
As he filled the stock brokerage firm’s branch manager’s empty glass with beer, Gun-Ho said, “To be honest with you, I do want to increase my ownership interest in Dyeon Korea without letting anyone know. I am loaded with enough cash for it.”
“There are several ways with which you can increase your ownership interest in the company. You can simply purchase more shares in the stock market, or you can contact the institutional investors who acquired the shares during the initial public offering period and buy their shares.”
“That is true.”
“But, if you publicly acquire more shares of Dyeon, your partner—Lymondell Dyeon—wouldn’t like it.”
“That’s why I wanted to discuss it with you, Mr. Branch Manager.”
“You probably want to consider using Private Equity Fund companies for it.”
“Private Equity Fund companies?”
“One thing that we need to keep in mind is that they are serving themselves; they are not working for us. We wouldn’t know how much they paid for the shares that we want when they bought them. And when they are ready to sell them to us, they might ask for a very high price, and we might end up not making enough profits.”
“You are saying that I have to take a risk when I use existing Private Equity Fund companies, right?”
“That’s right, because they are serving their own interests which wouldn’t necessarily serve our interests. If you want a safer way, you can establish a new private equity fund company. You can appoint your person to the director position, who can make an investment with a significant amount of funds on your behalf.”
“Since it’s a private equity fund company, I will need to recruit investor members, won’t I?”
“As I said, you put your man there who will make a major investment, and then you can add several people to the company in order to make it look like a private equity fund company. You will control the company behind the scene.”
“Hmm.”
“One of the requirements in establishing a private equity fund company is that you need to recruit investors less than 50 people. If you bring your man, I will take care of the rest of the investor members.”
“What do you mean by that?”
“I can find a good investing club, and then we can recruit its club members as our investor members in your private equity fund company. They don’t have to make an actual investment; we just need their names to use. We will pay them for using their names, of course.”
“Do you think that is possible?”
“Trust me, Mr. President Goo. I’m the branch manager of the stock brokerage firm in Gangnam District.”
“Hmm. Private Equity Fund Company…”
“You will need to register the company after forming it though. Also, you need to file a report about the new company with the Financial Supervisory Service within 2 weeks after establishing it.”
“I need to put some funds in it as its capital, don’t I?”
“Of course, sir. It’s an investment company after all. The relevant law states that such a company should have at least 3 billion won as its starting capital.”
“3 billion won… I guess I need an office for the company, right?”
“You can lease an office-tel, and place a desk and chair there, and hire someone who can stay in the office during work hours. The only purpose that this particular private equity fund company would be to make an investment in Dyeon Korea only, so you don’t actually need any employees. Also, it’s not like you want to invite investors in order to raise funds to make an investment either. Moreover, once your purpose is served, you want to dissolve the company, so you shouldn’t bring in actual investors.”
“Hmm, leasing an office-tel…”
“A private equity fund firm collects funds from a few wealthy investors privately and makes an investment in real estate or in the stock market. So, building a private equity fund company to serve your personal goal and run it as I just explained would work fine.”
“Hmm.”
“There are tons of office-tels that you can lease at a low cost around here. Many of them would let you use their place for a monthly rent of less than 1 million won with a security deposit of 10 million won. Also, I can find someone who you can trust. He will run the office for you. He used to work as a team lead at the global asset strategy department of Gangnam Bank until he was laid off during the last company restructuring. He is currently unemployed. If you ask him to work for you, he will be more than happy to assist you, sir.”
“Well, I heard what you suggested. I will do my own research and let you know.”
“I think this is the perfect time to do it, sir. Dyeon Korea is currently experiencing a price adjustment phase. This is good timing. Stock prices are going down after they decreased, and going up after they increased. Once Dyeon Korea’s stock price increases a lot, even placing a request to buy the stock would be difficult.”
“That sounds right.”
“Of course, you can use someone else’s name to acquire Dyeon Korea’s stock, but it’s not practically feasible because you want to buy several million shares, unlike little investors who usually invest several tens of million won. If you do it individually on your own, you will have to sit at the desk with your computer and purchase a small number of shares every day until you reach your goal. That’s not how you want to spend your day as a big player in Gangnam District.”
Gun-Ho recoiled as he thought of what he did using Seung-Hee sister’s stock account.
The branch manager said, “You want to let someone do the work for you.”
“Hmm.”
“Using someone else’s name to purchase a significant number of stocks is not desirable at all. It might not cause any problems for now, but if it does, it would complicate things to a great extent. With the scheme that I just recommended that you want to use, all you need to do is to pay the person who would do the work for you and also pay some taxes. It would be safe and convenient.”
“If I establish a private equity fund firm, I will have to put my funds in it anyway. I’m not sure if that would be okay.”
“If you don’t want people to know that you place your investment funds in the company, you can use a different path with your money transfer. For example, you can put your funds in someone else’s bank account, who you trust, and move the funds from that account to the company. Or you can use any other way that works for you.”
“I see what you mean. I will think about it, and will give you a call within a few days.”
The branch manager said, “Today’s lunch is on me, sir.”
“I will pay for it. It’s a restaurant in a hotel, and it will cost a lot.”
“I brought my bank’s business card. You are my VIP client, sir. You should let me pay for our lunch today; otherwise, I would be seen as someone who doesn’t treat his VIP clients right.”
“Haha, I see. Well, then thank you for lunch, Mr. Branch Manager.”
“Thank you for giving me the opportunity to serve you, sir.”
It was the end of October.
Dyeon Korea’s stock price seemed to be stabilized after it had hit the upper limit due to the stock split. It maintained around 6,000 won per share.
“It is still above the initial public offering price. (Dyeon Korea’s public offering price was 26,200 won, and since the stock was split as 5:1, the unit share price was 5,240 won.)”
Gun-Ho turned off his computer. When he then thought about giving a call to Seung-Hee sister, he received a call from Jong-Suk Park.
“Bro? It’s me. I’m on my way to Incheon International Airport.”
“Incheon International Airport?”
“Yeah. I’m leaving for India. You know, my business trip to Dyeon India. Dyeon Korea’s Manager Jong-Geun Lee, who is working in India now, called me that they received the machines.”
“Are you going there by yourself?”
“I’m with a team lead here, who volunteered to work in our India location. I told you about him last time we talked. You know, the person who served as a non-commissioned officer in the military before and has been in the field for a while.”
“Yeah, I think I remember you told me that before. Well, enjoy your trip and be safe.”