After my good night’s sleep, I wake up, shower, put on my best Kiton suit and tie, lace up my Berluti cap-toes, and head out into the world. My plan is simple: go about my business as usual. In my case, that’s as an investment banker, where I specialize in providing financing for midsize companies trying to make the jump to the big time.
As it happens, I’m ass-deep in a deal that’s beginning to crater. My client is an underwear company called The Pouch. Seriously. They have a patent on some technology that enhances the male package. Think of it as a push-up bra for men. To paraphrase the old saying, no one ever lost money investing in the insecurity of the American man. The company can’t keep up with product demand.
The CEO of The Pouch is named Paolo Amoroso. He’s based in Milan and looks it, right down to the perpetually maintained three-day growth of beard. During our initial meeting, Amoroso told me that the company’s goal was to raise $100 million without giving up more than a third of the equity. That meant they were looking for a banker who could convince people smart enough to have millions of dollars available for investment that The Pouch was currently worth $300 million.
That was going to take a lot of salesmanship. The company’s revenues in the last fiscal year were only slightly north of $20 million, and the industry multiplier was ten times the trailing twelve—which meant that most people on Wall Street would value The Pouch at $200 million, tops. Numbers don’t lie, so all the other banks were likely quoting Amoroso an IPO price of around $8 per share. To get the business, I told Amoroso that I could get him at least $10. Guaranteed.
That was six months ago. Amoroso has flown in from Italy because he’s finally realized that I lied to his face.
Amoroso is impeccably dressed, as always: pin-striped suit that looks as if it were sewn onto his body; a single sleeve button open on each arm to signal to the world that they’re functional; a white shirt that’s likely never been worn before, the collar standing at full attention; and a patternless silver tie. His stubble is the same length as always, and his thick head of black hair is gelled straight back.
Knowing what’s coming, I had suggested we meet for lunch. My thinking was that a meal would make him my captive audience for an hour, so after he chewed me out I’d still have some time to dissuade him from firing us. He said he’d prefer to meet in my office, which I took to mean that he didn’t want to spend a second more with me than was absolutely required.
The first good sign of this encounter, though, is that he’s come alone. Usually he travels with flunkies, but he must have thought ripping me a new one would be humiliating enough without an audience.
“Paolo,” I say as if we’re still best friends.
He stares at my outstretched arm, and I fear he’s going to leave me hanging. But then he shakes it.
Even before I can offer him a seat, Amoroso says, “Let me tell you why I’m here.”
We’re now in the awkward pose of me standing in front of my desk with him facing me, although there is an array of perfectly comfortable chairs in my office going unoccupied.
“Want to sit down?” I say with a smile.
“No,” he says flatly. “This should only take a minute.”
His accent is slight. Just enough to enforce he’s Italian, but not so much as to make it difficult to understand him.
“Okay, then. Shoot.”
“I’m not going to spend time going over ancient history, but just so we’re on the same page, when you were pitching me, you told me that you could raise the hundred million dollars by offering ten million shares, and you guaranteed—that was your exact word, guaranteed—an offering price of at least ten dollars a share. And now you’re telling me that the best the market will bear is somewhere between seven and eight. That puts us in the position of either raising twenty to thirty million less than we need, or giving up more of the company to get up to the original hundred million. Needless to say, neither are attractive alternatives to my board.”
“I understand, Paolo. Believe me that I do, but—”
He talks over me. “I’ve heard your BS before and, believe me, I didn’t fly across an ocean to hear it again. Just let me say what I came to say, and then you can go about your day lying through your teeth to some other client, no doubt.”
He’s right. Better for me just to shut up and let him finish. So I nod that the floor remains his.
“I’ve taken meetings with other banks, and everybody tells me that your read of the market, at least, is correct. As a result, the company is resigned to the fact that our stock is going to be valued in the seven-to-eight-dollars-a-share band at offering. And believe me, I’d go to another bank in a heartbeat to finish the deal if it weren’t for the fact that we’re thirty days out with you guys and they’re all telling me that they’d need six months, minimum, to get us to market. Of course they can’t guarantee today’s pricing will still be there six months down the road.”
I try not to smile, but I know this means we’re in. He can’t fire us without putting the company at risk.
“Where that leaves us is that we’ll stay with you, but only if we get some concession on the fee to compensate us for the shortfall. Since we’re taking a twenty to thirty percent hit, the fee has got to be reduced accordingly.”
By now I’ve assumed a more relaxed posture, leaning against my desk. Paolo tops out at five seven—thanks to the two-inch heels he sports on his alligator-skin shoes. Even slouching, I still maintain a considerable height advantage.
I’m not going to reduce our fee. Given my bait-and-switch to get Amoroso to sign on in the first place, the odds are awfully good that The Pouch isn’t going to be a repeat customer. That means that any gesture of goodwill on my part now is simply throwing money away.
Of course I can’t say that. So I launch into classic banker double-speak.