The Fox of France

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.

Representing "Bonaparte Electric," Louis Bonaparte contended that transportation costs for filaments were minimal. Moreover, although patent protections were relatively robust across most of continental Europe, they were considerably deficient in some remote regions, notably in Russia, where the enforcement of patent laws remained dubious. As for Turkey, the situation was even less certain.

However, these weren't the most critical points; the paramount concern was the British.

"The British were the first in Europe to have patent laws, so nobody knows how to exploit these laws better than they do. Apart from that, in their colonies, they can easily sidestep patent laws. For instance, in India, most regions are under the control of the East India Company. Even though these areas nominally belong to Indian rulers, the British can clandestinely establish illegal factories under their names, producing illicit goods not only for sale in India but also smuggling them into Europe. And since it's the Indians doing it, not the British, theoretically, our retaliation could only be against goods from a particular Indian principality. But let's face it, we don't have much trade with India; what kind of retaliation could we even pursue? Therefore, worrying about the risks of technological leakage isn't baseless. Hence, for the time being, filament production can't happen in Austria."

In reality, even in France, despite having several bulb factories, they only had one filament factory. Building a dedicated filament factory for a limited bulb production, economically, didn't make sense.

This latter argument had more persuasiveness. After all, Austrians were involved in this affair primarily for profit. Moreover, Louis presented a novel counterproposal.

"Additionally, Mr. François," Louis stated, "given the high demand and profitability of light bulbs, we naturally want to increase production. This means establishing more bulb factories and more filament factories. We welcome anyone willing to be our business partner in making profits. Mr. Fritz, if you're interested in the filament factory, we suggest you invest in our filament and bulb factories. Would that interest you?"

"Ah, the prospect of merely erecting an electric plant in the Balkans to earn some profit might yield a sum, but oh, the limits it possesses. However, an investment in 'Bonaparte General Electric'? That's akin to picking up coins off the ground! When François heard this suggestion, his eyes lit up as if catching a glimpse of a treasure trove.

Much like Napoleon and Joseph anticipated, this François was, in fact, a representative of the upper echelons of Austria. Accompanying him were a group of Austrian nobles.

Initially, when France had just settled peace with Austria and other nations, Austria harbored desires for 'a decade of gathering strength, a decade of learning lessons, aiming for retaliation.' Yet, after these two years, they observed France's burgeoning development. Presently, there were no signs of imminent downfall. The disparity in power between Austria and France was evidently widening. Formerly, Austria could not defeat France, but with determination, could make France bleed. Now, even if they engaged in war again, even Archduke Karl found it challenging to confront France. It seemed that, at most, they could only splatter the French with some blood.

Faced with this perilous scenario, Austria's upper echelons found themselves divided into two factions. One, led by Archduke Karl, aspired to follow France's footsteps—industrialize and strengthen the nation. On the other side stood Emperor Friedrich II. The Emperor was cautious about any change. On one hand, he feared that industrial and commercial growth might excessively empower the commoners, disrupting the fragile internal balance of the empire, leading to undesirable consequences. On the other hand, he realized the necessity for change. Continuing in old footsteps would inevitably result in the empire's collapse.

The Emperor understood the need for change but was wary of hastening it. Moving too slow might spell disaster, yet hastening it might yield similar results. It's said that fearing a fate akin to his aunt and uncle's, the Emperor was troubled, losing sleep and weight.

It's rumored that it was Metternich who suggested to the Emperor to align their interests with France's, making social reforms easier with France's support. Even if France didn't actively incite revolution within Austria, as long as they didn't interfere, Austria's situation would be far more stable.

Now, the French agreed to assist Austria in constructing power plants and electric factories, aligning with Archduke Karl's 'strengthen the nation' doctrine, or at least adhering to the 'enrich the nation' principle. Additionally, Louis Bonaparte's proposal to invite Austrians to join 'Bonaparte General Electric' resonated with Emperor Friedrich's desire to bind Austria's upper echelons, particularly the Austrian royal family, with France.

Although France now existed as a republic, under the leadership of Napoleon, his authority surpassed that of most monarchs of sovereign nations. One could argue it matched or even exceeded the authority of the Sun King, the 'I am the state' monarch of yesteryears. Simultaneously, the Bonaparte family's influence in France was staggering, rivalling the Bourbon family's sway. If only Napoleon were not merely the first consul but a hereditary king, the Emperor might have considered proposing a union with Napoleon's family. After all, marital alliances were a hallmark of Austrian tradition, were they not?

For François, this approach appeared to gratify the desires of both factions within the nation, a picture of perfection. He hurriedly inquired about the news regarding investing in 'Bonaparte General Electric.'

'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.'

School's keeping me occupied today, so this is all for now."