The value of Swap shares rocketed through the stratosphere in a space of six months, from an initial pricing in punts, or Irish pounds, of I£10 to I£12,000, with Kavanagh still holding over twenty percent of the shares in the company.
The initial capital of the company at its foundation had been I£1000 divided into 100 shares. Kavanagh had held 50%, Castlemain 20% with Jim Carmichael and Phil Moftan holding 15% each.
After three months the owners, seizing the opportunity in a booming market for Hi-Tech stocks, took the decision to increase the capital to I£3 million by the issue of 600,000 new shares, of which 400,000 were to be subscribed to immediately at an initial price of I£10 per share, half of those being reserved for the existing shareholders and the other half being offered to the market, they were snapped up on the first day of trading. All the shares were tradable on the markets.
The founders paid into Swap cheques equal to the value of their new shares, with monies advanced by a loan facility from the Irish Union Bank. At the end of the first week of trading the value of the shares had had increased from I£10 to £200. The owners then sold shares onto the market for a sum equal to that of their loans from the Irish Union, they then repaid their loans together with interest calculated at an annual rate of 8% for a total period of ten days.
Kavanagh sold 10,000 shares for I£2 million and paid back the advance to the bank plus the interest of about I£5,000 and pocketed I£995,000. In only ten breath-taking days he had made a paper profit of almost I£19,000,000 based on the value of the 90,000 shares he still held.
The other three partners carried out the same operation. The company had already reached a market value of I£80 million and then continued to surge ahead by leaps and bounds at a dizzying speed, driven by the blind speculation of the punters. That had been merely the start and in the months that followed the shares again multiplied by almost twenty times.
The value of Kavanagh’s shares made, an already fairly wealthy man, on paper that is, the owner of a great fortune; greater than almost any other person in the Republic, he was a billionaire in Irish Punts.
The 200,000 shares that the company had initially sold to the market had brought in a mere couple of million Irish Punts at the offering price, which were peanuts compared to their subsequent value. The directors then took the decision to take advantage of the rise in the market value of the shares and the frenzy with which the punters were throwing money at Hi-Tech stocks. They sold to the market the remaining 200,000 non-subscribed shares, thus creating a large capital reserve, which would keep the company in cash if the going got bad.
He with his partners had become ‘dot-com’ multi-millionaires, like another couple of hundred or so fortunate players around the world, from Hong Kong to India and from London to New York and San Francisco.
How many of them would keep their fortune was another question. It was not the first time fortunes had been made by speculation or break-throughs in new technologies. From the South Sea Bubble to Railways, from Steel to Automobiles, both lucky and daring men had become immensely rich overnight, many to lose their fortune almost immediately.
Kavanagh’s previous brushes with disaster and misfortune had made him a very cautious man under all the brouhaha that surrounded his rise to instant fame and the delirious state of the stock market. He had become a national celebrity, recognised in the streets of Dublin by passers-by, he was invited to talk shows and to press interviews.
As a celebrity in a small country his every move was under the scrutiny of the media. The readers of the press wanted to know more about this new Irish hero. Who was Sean Kavanagh? Where did he come from? What was his trick? His beginnings with the NIB were been held up as an example for would-be-investors in Ireland and its booming Celtic Tiger economy.