The chimes of the Amsterdam Mint Tower sounded against the clanking and rumbling of the trams crossing the bridge over the Amstel River. An endless stream of bicycles ringing their bells wound their way around the pedestrians; the bicycles seemed more dangerous than the cars.
He had checked with the reception at the Hotel de l’Europe, Phil was not in his room. Kavanagh left a message that he would wait for him either at the American Hotel or in a cafe on the square by the Stadschouwberg Theatre. Then taking Leidse Straat he strolled slowly back in the general direction of his hotel, stopping from time to time to look into the shop windows.
On arrival at Schipol Airport the previous evening he had booked himself into the American Hotel, which was part of the Inter-Continental chain. Kavanagh had a corner room overlooking the Singelgracht canal on the second floor. The hotel was a comfortable, but a typical old Amsterdam style building, a strange mixture of Gothic and Nouveau Decor architecture, probably built at the end of the nineteenth century. It was situated just a block from the Stadschouwburg Theatre on Leidse Plein, a square with its popular cafes and terraces, filled with Amsterdamers and tourists enjoying a Dutch beer or an expresso coffee lavishly topped with fresh cream and a generous sprinkling of chocolate powder.
He took a seat at one of the front tables facing the square waiting for Phil to make his appearance, hoping he was not being followed by one of those muck raking newspaper reporters.
The shares in Swap had been sold in many small blocks over a period of ten days. It was a Monday evening, after the close of Wall Street, Kavanagh had informed his two partners that the sale of the last blocks of shares to the market had been successfully completed. They then decided to meet, to plan how they would handle the news, which would sooner or later become public.
After a conference call, the three agreed Phil meet with Kavanagh the following Saturday in Amsterdam, away from Dublin or London. All seemed well. The sale of the shares had passed quietly, unseen, and without any noticeable reaction from the overheated market during a week when the Nasdaq had once again beaten records in New Economy Hi-Tech stocks.
What they had not anticipated was the precipitation caused by the unexpected plunge of the Nasdaq the following Monday. It was after one of those periodic weekend announcements by the American Secretary to the Treasury, Alan Greenspan, designed to calm the markets, of a hike in interest rates and a severe warning of the potential development of a speculative bubble. The market reaction was certainly no more than a passing, though brutal swing, and nothing else.
Swap’s shares lost fifteen percent in a single trading session, as did many other such shares.
What they had not foreseen was a whiff of scandal, as newspaper and TV stories broke on Kavanagh’s banking arrangement with the Irish Union to obtain the NIB assistance for his initial start-up in Ireland some three years earlier.
Kennedy had called Kavanagh from Limerick to tell him about the story in the local paper. He did not hide the fact that it could be nasty, though brief, and suggested Kavanagh be unavailable for a few days.
When the shares lost a further eight percent the same day, Kavanagh decided to take Kennedy’s advice and left for Belfast, where he could discretely take a flight to Amsterdam as foreseen, though a little earlier than planned.
The fall in the Swap shares price continued in spite of a general pause in the market turbulence.
It was the coincidence of a series of isolated but nevertheless indirectly linked events that resulted in a calamitous scandal, ignited by the press, with questions in the Dail to the Taoiseach, the prime minister of the Irish Republic, concerning government policy related to subsidising investors. Certain ministers and officials were accused of having taken advantage of services offered by investors for their intervention with the NIB to obtain favourable decisions and conditions.
By Saturday the shares had lost 38% and the collapse was making hot news in the financial columns. The press linked the crash with the political implications of the NIB’s participation in the Swap start-up and the non-availability of Kavanagh for comments.
Kavanagh saw the thick form of Phil arriving in the square and made a sign.
“So what’s it like on the run?” laughed Phil.
“I’m used to it!” said Kavanagh forcing a smile. “A bit of a fuck up! Right!”
“You could put it that way, I suppose. But there are positive aspects.”
“What’s the next move then?”
“I suggest you hang around here for a few days. Enjoy your trip to Amsterdam,” then smiling he added as an after thought, “maybe we can go to the Casino!”
That did not surprise Kavanagh for one moment. Phil was an inveterate gambler and the Casino was just a block away along the same canal that bordered the American Hotel.
“The important thing is they don’t find out that you, I mean we, have sold all those shares, because then the shit would really, and I mean really, hit the fan!”
“What are the chances of that happening?”
“I’m sorry to say – pretty fucking high!”
“Shit!”
They dined early in an Indonesian-Chinese restaurant that Kavanagh had earlier spotted, just short walk away on Korte Leidsedwars Straat, off the square. The food and wine were excellent, but in spite of the fabulous wealth they had acquired they were subdued, almost depressed as they tried to work out a game plan for the next days.
Everything depended on how the market would move and its position regarding Swap, whether the government in Dublin could avoid a scandal and the public’s reaction to the media, who as usual were trying to whip up a witch-hunt.
The whole situation was suspended in a delicate balance, which could at any moment violently crash down on their heads if the news came out on how they had cashed-in their shares, which would certainly be interpreted as treason to the market and its investors or even fraud.
The next day Phil left Amsterdam by an early flight leaving Kavanagh to stew, waiting to see how things developed over the following twenty-four hours or so before deciding to return to London or Dublin.
It was the Sunday Irish Times that launched the hue and cry and led the pack the following morning. It was no wonder that when trading commenced on the Monday morning that the market was dumping shares in Swap.
It was the same press that stampeded investors into the market with the never ending need to fill their financial pages, day in day out, with something to hold its readers, an endless stream of conflicting advice, new era stories, news of business personalities, rising or falling, as proof of their journalist’s two a penny get rich quick theories. The same press, in its desperate need to sell newspapers was prepared to hound just about anybody, even their proclaimed heroes of yesterday, in their daily search for a headline story.
Kavanagh, unaware of the Irish Times’ headlines had moved to the Hilton at Schipol Airport late that Sunday morning, in the hope he could quickly hop on a plane to London the next day if things calmed down.
That Monday morning he tried to contact his partners without success, leaving messages on their voice mails. When Phil finally called Kavanagh back, he informed him that the worse had happened; the shit had hit the fan and suggested that he lay low. He and Jim Carmichael were embattled with the press and were trying to calm the banks and investors. Phil would call him back that evening.
Kavanagh calmly decided he was on his own, he took the train from Schipol to the Amsterdam Centraal Station, where he bought a one way rail ticket for Frankfurt.
The media decreed a general hue and cry and the authorities set the bloodhounds loose hot on the tail of the swindling upstart, for his capture and public pillorying.
In his hotel room at Frankfurt Airport, Kavanagh watched the BBC evening television news with growing dismay. However, he knew he had taken the right decision, he had not been wrong about those who until a couple of days previously had praised and worshipped him.
The announcement the previous Saturday of the failure
of the mediation between Microsoft and the Justice Department of the USA was just beginning to have its effects on the markets.
In Washington, a judge, Thomas Penfield Jackson had announced that same Monday morning, just after the opening of Wall Street, that he would render public at 5 o’clock the same afternoon his verdict in the case.
The verdict would be that Microsoft was in violation of the anti-trust laws, guilty of an illegal monopoly and business practices. The judge qualified Microsoft as a ‘predator’ taking advantage of its dominant position as the supplier of the personal computer operating system ‘Windows’ on ninety percent of the world’s personal computers.
The consequences would be either the dismantling of the group, a huge fine running into billions of dollars or severe restrictions on the groups activities, by for example forcing them to publish their technical codes that software companies need to make their programmes function with Windows.
In making his decision the judge wiped billions of dollars from of the global economy driven by the New Technology sector.
The result was that the shares of Microsoft fell over fifteen percent in a single session pulling down in its wake all the shares of the Hi-Tech market. The Nasdaq fell six percent in one day after an eight percent fall in the previous week and twenty percent in one month.
Microsoft shares at their entry into the market on 13 March 1986 had been valued at twenty-one dollars; fourteen years later they were quoted at over 14,000 dollars or an increase of 66,750%. The rights of an original single first issue share transformed it into 144 divisions or shares as a result of successive new issues.
The shares of Cisco, the next most valuable company in the world that vied with Microsoft for the top spot, had entered the market at eighteen dollars were worth 21,435 dollars, a growth of 119,000% in ten years.
Kavanagh could not help mentally calculating the results of the fall in Microsoft’s shares. They were down from the beginning of the year high of around 120 dollars to 106 dollars on the previous Friday, and at that moment were down to 87 dollars.
He calculated that the 15% of the shares in Microsoft that Bill Gates personally owned, had been worth 90 billion dollars on 1st January, then 80 billion on 31 March and now 65 billion, Gates’ fortune was melting like snow in the midday sun, he had lost 14 billion over the weekend alone.
That evening at the Frankfurt Airport Sheraton, Kavanagh eyes were fixed to the Bloomberg News that announced the market had lost another 4.7%, zapping to the DW News he saw Deutsch Telekom had lost over 10% that same day.
Kavanagh had a surging feeling that his actions were justified, he had made the right decision. The crash he had feared was taking form. His decision made, he would leave the hotel for the international airport terminal next morning.
Chapter 20
At Castlemain’s Retreat