Chapter 84: Game Theory (1)

The internet, which emerged in the latter half of the 20th century, revolutionized people's lives.

Riding the wave of digitalization, IT companies grew rapidly.

In the past, the top market capitalization groups were dominated by companies producing tangible products such as energy, automobiles, and steel. However, entering the 21st century, these positions were taken over by IT companies like ENP, GUB, NS, and AMZ.

Now, people spend most of their time on the internet, to the point where human civilization cannot exist without it.

The future lies in the internet, and at its core is the cloud.

Alex Preston highly evaluated the growth potential of the cloud.

IT companies were already competing fiercely in the market.

AMZ's ZWS, NS's Azure, and GUB's BigStorage were known as the cloud's Big Three and quickly dominated the market.

However, as the market was growing, there were still plenty of opportunities within it. He met Rolf Buch, who was eyeing entry into the market.

Rolf Buch had a program called Minerva that he developed and the reputation of being a genius in Silicon Valley, while Alex Preston had the capital and the ability to manage it.

The two were a perfect match.

Indeed, CoolCloud grew at an unprecedented rate, eroding the market share of the Big Three. Customers were satisfied with the services provided by CoolCloud and willingly paid for them.

Alex thought he had found the best partner.

Until just before that, that is.

'How could I have partnered with such a fool!'

When running an IT company, patent and copyright issues are inevitable.

It was also Alex's role to resolve these issues when they arose.

However, he failed to address the most critical patent, something he had never even considered as a problem.

The core program, which was the foundation of the business, turned out to be stolen!

Purchasing patents at low prices to attack companies is a typical tactic of patent trolls.

No, it would have been better if it had fallen into the hands of a patent troll. In that case, it could have been resolved with money.

However, the opponent wanted CoolCloud itself.

To address the situation, Alex first met with the lawyers from the Preston family's law firm. After reviewing the documents, the lawyers uniformly shook their heads.

"The evidence is too clear."

"There's no way out."

"There are no loopholes in the rights acquisition contract."

After all, David Rockheart himself is an investor and a lawyer, so it's unlikely he left any gaps in the contract.

"Currently, the best we can do is to drag out the lawsuit as much as possible..."

Even that was not a viable solution.

Cloud companies need to provide stable services.

If they are embroiled in patent lawsuits and there's a risk that the core program could be discontinued at any time, who would continue to do business with them?

Moreover, it's not just a patent infringement but also a moral issue. During the lawsuit, CoolCloud's image would plummet.

CoolCloud had never turned a profit since its inception.

Yet, it was valued at $100 billion due to its overwhelming technological capabilities and growth potential.

In fact, the losses were rapidly decreasing.

The current losses were due to investments, and if he wanted, he could have easily turned a profit.

All of this was made possible by Minerva.

Without Minerva, how much would the company's value drop?

Alex had invested all the funds he received from investors into CoolCloud and even used family money.

He invested $500 million at the start and an additional $1.2 billion later. He also attracted investments from PrestigeA PE, selling 20% of the shares for $3.2 billion.

Therefore, the total amount he invested in CoolCloud was $4.9 billion.

Generally, private equity funds aim for a 100% return in five years. While 100% sounds impressive, it translates to a 14% annual return.

After deducting various costs and salaries, the actual return rate is slightly over 10%.

However, the case is different for VCs (venture capitalists).

Given the high risk, the return on success can be 10 or 100 times.

If the company grows to its maximum and successfully goes public, the $5.9 billion he invested could become $500 billion or even $1 trillion.

Success was just around the corner. Everything was within reach.

But...

A hand from somewhere grabbed his ankle.

What if he fails?

That would be the end. He would be completely pushed out of the Preston family's succession.

The discomfort he felt during their first meeting turned out to be real.

'Could they have known about CoolCloud's weakness from the beginning?'

They intended to acquire CoolCloud from the start.

If he had noticed then, he could have found a way to respond, but it was too late.

'How did they find out?'

Rolf Buch was the top genius developer in Silicon Valley. No one doubted that he developed Mimir.

Everyone was deceived by his skills and reputation, even his partner.

But...

'How could they figure it out so easily, something I couldn't even notice after three years?'

Thinking about it, it's the same with everything else.

Uncovering and exposing the fund's insolvency, revealing the issues with Thomas Motors, and this current situation.

It's as if they could see the palm of their hand, precisely targeting the problematic areas.

'Could this guy, who was just a regular employee until recently, really be that capable? Does that even make sense?'

Was it a cover?

So many thoughts came to mind because it was hard to believe.

Many companies had wanted to buy CoolCloud, offering huge sums of money.

But this opponent was different.

They are threatening to sell, holding the company's weakness. It's not a genuine acquisition but a plunder.

'As long as they want to acquire, I can't immediately file a lawsuit or reveal the truth.'

Alex had no intention of selling the company at a low price.

Strictly speaking, this issue is not the company's fault but Rolf Buch's personal fault. He was also deceived by his partner's lies.

'If Rolf resigns as co-CEO and leaves the company before the issue erupts, it might minimize the controversy.'

If Rolf is expelled, the impact of their exposure would be minimal.

This could lead to negotiations with Continuity Capital and the use of Minerva.

'Even if the negotiations fail and we can no longer use Minerva, Seed can probably find a way to resolve it.'

Could they create a similar program to Minerva, avoiding copyright issues?

Moreover, the market is flooded with cloud-related companies. If they need a specific technology, they can always buy it.

If that fails, the company must be sold. Even without Minerva, there are companies willing to buy CoolCloud.

In any case, the conclusion is to quickly remove Rolf from the company.

Rolf Buch was a symbol of CoolCloud. He handled all the publicity and external activities.

But now, he is the company's biggest weakness. To protect CoolCloud, he must be expelled as soon as possible.

Alex said to Rolf, hiding his true feelings:

"Cancel all future schedules. It's best not to come to the company until the situation is resolved. Think of it as a vacation for now. I'll try to find a solution in the meantime."

Rolf nodded weakly in response.

* * *

Currently, CoolCloud's enterprise value is $100 billion.

It was only a short while ago that the value was $700 billion, and it has already increased by $300 billion. If it were sold at this price, its actual value would be even higher.

During the first round, CoolCloud's value was $150 billion just before its IPO. Investors lined up to buy at that price.

Assuming CoolCloud's value is $100 billion.

This is significant enough to rank second in the KOSPI market and place it among the top five unlisted companies in the U.S.

This is because it holds the second position after the Big Three in the cloud market.

David asked me:

"Are you really considering acquiring it for $5 billion?"

"Is that not possible?"

Until last week, Continuity Capital's capital was $127 million. However, due to the investment in Thomas Motors, it gained $5.042 billion in profit.

After deducting related expenses and investing $100 million in a company called Nextrogen, the current capital is approximately $5.068 billion.

This is over 6 trillion won, an enormous amount of money.

Even if I do nothing from now on, I might not be able to spend half of this money. However, in the financial market, it is a considerable amount.

David bluntly said:

"It's impossible."

"Why?"

"There are two reasons. First, even if Minerva is abandoned and the company is split and sold, it would still be worth more than that."

I nodded.

"Indeed, the customers, know-how, sales network, and data accumulated over the years are also assets."

"Second, Alex Preston has invested $4.9 billion in CoolCloud. Selling it for less would result in a loss, so he wouldn't agree."

"That's true."

The company is currently valued at over $100 billion. Even with the leverage of its weakness, acquiring it for $5 billion would be difficult.

"Then, how much can we negotiate down to?"

"How much do you want to negotiate down to?"

"..."

This kind of conversation reminds me of buying a phone or a used car.

"As you know, acquiring CoolCloud is different from previous investments."

Previous investments involved investing in companies that wanted the funds and acquiring shares. This time, it's about forcibly acquiring a company that doesn't want to be sold.

"Have you ever done a hostile M&A?"

"No."

During the first round, I only observed others doing it.

"M&A itself is not easy, but a hostile M&A is even more challenging."

A hostile M&A is an acquisition and merger without the consent of the other party.

Most M&As are conducted with mutual consent, so forced acquisitions are not common.

"The defending side will use every method available."

"If you were Alex Preston, what would you do, David?"

He thought for a moment and then answered:

"I would quickly remove Rolf Buch from the company and erase any association with him."