Chapter 304: Preferred Shares

Chapter 304: Preferred Shares

Allowing the Austrians to establish their own power plants didn't bother Joseph much. After all, the scientific principles behind it had been widely revealed, and everyone understood the workings of these stations. It was only a matter of time before the English could set up their own. During this window, expanding France's power plants across the entire European continent seemed promising. It would tether the continent's electricity standards to France, a definite advantage.

However, producing electric bulbs in Austria posed a different challenge. The scientific principles behind light bulbs were relatively simple, understandable by anyone with a bit of knowledge about electricity. Yet, technically, they were formidable. They fit the bill for being hard to replicate: high craftsmanship and specialized materials.

In bulb manufacturing, one crucial technical requirement was vacuuming the air, directly affecting bulb quality and lifespan. In this aspect, the French had unparalleled technical expertise. Before unveiling light bulbs to the public, "Bonaparte Electric" had already registered numerous patents concerning vacuuming technology. Although these technologies weren't impossible for others to replicate, having these patents meant Napoleon's France could prevent the legal sale of any products infringing upon France's patent rights in most European countries, acting as a formidable barrier for others to enter this domain.

Certainly, there were various methods to create a vacuum, but the commonly used, cheaper, and easier implementations had all been patented by "Bonaparte Electric." Any foreign manufacturer attempting to bypass these patents would face substantial costs.

The second issue was the specialized materials. Anyone could buy a bulb, shatter it on the ground, and extract the filament to see it was made of carbon. But the question remained: what specific carbonized material was it? People could only surmise it was from some plant. Identifying the suitable plant among many required significant effort.

Collaborating with Austrians in light bulb production, even if they restricted sales to specific regions, risked leaking certain related technological secrets. Hence, after meticulous consideration, Napoleon instructed Metternich that France had "no particular opinion" regarding economic cooperation with Austria.

This notion of "no particular opinion" meant they could negotiate, and whatever resulted, France wouldn't intervene. It somewhat echoed a future nation's "we don't know what happens next." Essentially: succeed, and I claim a share; fail, and it's not my responsibility.

Metternich understood immediately. This was negotiable, but France would likely have additional demands. Yet, negotiations implied a potential outcome, and with it, a share of credit and reward.

In recent years, both French diplomats stationed abroad and foreign diplomats in France had become wealthier. While positions like ambassadors and consuls to France still considered factors like loyalty and capability, other roles within embassies and consulates were predominantly awarded to the highest bidder. These positions easily facilitated business relationships with the French, leading to incidental profits.

With such lucrative opportunities for subordinates, the heads of embassies and consulates weren't idle. Moreover, fostering economic and trade ties between nations was a key responsibility for ambassadors and consuls.

Thus, a man named François, armed with a letter bearing Metternich's signature, approached "Bonaparte Electric" to discuss purchasing a factory.

While "François" might have been an alias, the letter signed by Metternich wasn't forged. More importantly, the certificate issued by Bon Bank certifying a million francs was unquestionably genuine, clearly outlined on that document.

Subsequently, both sides engaged in candid discussions about collaborating for profit. They quickly reached basic agreements on most issues, leaving only one major point unresolved: the filament factory to complement the light bulb factory.

The French insisted that given Austria's technological and managerial capabilities, managing a filament factory was implausible. Moreover, an Austrian filament factory could potentially expose critical commercial technological secrets, a risk too significant. Hence, France proposed manufacturing filaments in France, shipping them to Austria for assembly, and then letting Austrians sell them in designated areas.

However, François argued that this would only escalate costs unnecessarily. Besides, France's technological secrets were safeguarded by patents, rendering concerns about technological leakage baseless.

'Ah, Monsieur François, perhaps you are unaware that 'Bonaparte General Electric' is an enterprise with numerous investors. The Bonaparte family's stake in the entire enterprise is less than fifty percent. Ergo, we do not possess complete controlling rights. This signifies that any extensive expansion must obtain approval from the shareholders' assembly. Nevertheless, as you know, we cannot allow significant alterations in the distribution of the company's shares. Therefore, even if we convene a shareholders' assembly, considering the present circumstances, the share we can offer will not be substantial.'

This statement left François somewhat disappointed. However, even a small share would be welcome. He hastily inquired, 'So, how much stake could we acquire at most?'

Louis replied, 'Monsieur François, you're aware that 'Bonaparte General Electric' is sure to generate considerable profits. This is common knowledge. This renders our company's financing exceptionally easy. We can effortlessly borrow funds from any bank at an interest rate significantly below the market rate. In this situation, I believe the shareholders' assembly won't consent to yield a significant portion of ordinary shares. Personally, I estimate it won't exceed five percent.'

The estimation of 'not exceeding five percent' disappointed François. He understood that investing in 'Bonaparte General Electric' would not only hold political significance but would assuredly yield substantial economic gains. However, a share not surpassing five percent felt insufficient.

'Why restrict the funds for expanding the business, Mr. Bonaparte? More capital could facilitate quicker business expansion, earning more profits,' François queried, furrowing his brow slightly.

'Because changes in shareholding would alter the internal power dynamics of the company, thereby affecting the company's future. The company's present development is remarkably smooth. Hence, the majority of shareholders are naturally averse to significant changes in the company's power structure. Hence, shareholders prefer acquiring expansion funds through loans rather than introducing more partners. I believe this is quite natural and easily understandable, wouldn't you agree?' Louis explained. 'However, perhaps we could collaborate in a different manner.'

'What do you mean by a different way?' François hastily asked.

'Ah, Monsieur François, have you heard of preferred stock?' Louis inquired.

François shook his head in confusion.

Preferred stock refers to shares with 'preferred rights.' Shareholders of preferred stock enjoy priority in company assets and profit distribution, with lower risks. However, preferred stockholders usually lack voting rights on affairs not concerning their interests. They also lack voting and being voted rights, usually without involvement in the company's operations. Preferred stockholders cannot withdraw shares but can only be redeemed by the company through the preferred stock's redemption clause.

This type of 'preferred stock' was invented by the English in the 16th century. However, due to market irregularities and inadequate business development at the time, the advantages of preferred stock weren't fully realized. Instead, it caused several management issues, leading to its limited use and near-oblivion. In history, it wasn't until the 1920s when a British company, facing financial difficulties in developing canals, unable to secure funds from banks due to high interest rates, and failing to attract new investors with common stock, reintroduced 'preferred stock' from centuries ago, and achieved remarkable success. Hence, this ancient 'financial innovation' began to find widespread use.

However, when Louis mentioned 'preferred stock' to François, centuries had passed since the initial unsuccessful attempt at 'preferred stock.' Unless someone specifically studied this area, it would be improbable to understand the meaning of the term. Therefore, François' lack of knowledge about this term was perfectly normal.

Louis proceeded to explain the concept of 'preferred stock' in general terms to François. Then he remarked, 'I believe your primary objective in investing

in our company is to earn profits. In terms of profit-making, there isn't much difference between 'preferred stock' and ordinary shares. In fact, in dividend distribution, there are certain advantages. I assume you're rather content with our company's current operations and future prospects. You probably don't intend to alter our company's business model and development strategies. Therefore, this form of 'preferred stock' should be a suitable solution for both of our needs.'

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