Holy Roman Empire - Chapter 153:

Chapter 153: Chapter 40: Capital Influx

Translator: 549690339

The Vienna Stock Exchange, established in 1771, was the largest stock exchange center in Eastern Europe, attracting investors from all over Europe.

On the morning of June 11, 1850, at six o’clock, Vienna Stock Exchange was already swarming with people.

The event that could make shareholders come early to line up was naturally a major one. Austria’s largest railway company—the Austrian Federal Railway Operating Group—was listing here today.

After such a long period of anticipation, the concept of railway stocks had already heated up significantly, and almost everyone believed that this sunrise industry could bring them generous returns.

A middle-aged man dressed in luxurious clothing got out of a carriage and cursed upon seeing the queue, “Damn, why are there so many people today, could they all be racing to go ‘Geh scheißen!’” (Eat shit, huh?)

His behavior quickly caught the glaring eyes of those around him, and a young police officer charged with maintaining order approached, saying discontentedly, “Sir, please watch your language. This is a high-class venue, and the use of foul language is prohibited.”

The man in fancy clothing quickly shut his mouth, knowing that if he continued, he might be charged with disturbing the peace in a public place.

On a normal day, it didn’t matter; the worst he might have to do would be to take a trip to the police station—merely swearing wasn’t considered a serious crime, and a fine would settle the matter.

But not today. The initial public offerings (IPOs) were always the favorite mines of stock traders, especially when it came to the railway stocks with immense potential. If he missed out today, the next opportunity to buy would not come at the same price level.

Observing his reaction, the young police officer left, satisfied.

Those queuing here wouldn’t be any significant figures; the real big shots would have already gone directly to the VIP trading room upstairs.

Vienna was certainly not lacking in power brokers—one shouldn’t judge by these inconspicuous young officers; they might be from some noble family’s side branch.

This was something one could discern from their demeanor alone, as the newly rich and nobility were incompatible standing beside one another, distinguishable at a single glance.

Seconds turned into minutes, and at precisely eight o’clock, the doors to the trading hall were opened. Although everyone was anxious, they didn’t rush in.

Rules were important here, and considering the line of police officers standing in front, no one wanted to be cordially invited to the police station for tea. Missing out on trading time because of that would be a cause for tears.

In that era, there was no internet, no electronic displays, and even electricity had not been installed—every transaction was carried out manually.

On giant blackboards, staff members would write down the data. Investors would look at the data to decide whether to proceed to the trader to register a transaction.

At that moment, a stock exchange manager walked out and bellowed, “The Austrian Federal Railway Operating Group is listing on the Vienna Stock Exchange today, with a total company valuation of one billion Shields.

A total of three million shares are being offered to the public, accounting for thirty percent of the total share capital, at an issuance price of ten Shields per share, with a planned fundraising goal of thirty million Shields. We welcome interested friends to hurry up and buy.”

No sooner had he finished speaking than other employees repeated the message in the crowd, trying their best to make sure every person received the information.

There was no helping it—in that era, communication was all about shouting. If one didn’t have a loud enough voice, they really couldn’t do the job.

The trading had already begun. Although it was said that three million shares were being issued, definitely not as many were circulating in the stock exchange. Banks and securities companies had pre-subscribed to a part of it.

This was the most common method of inflating share prices. If the circulation was too high and the market became saturated, even premium stocks would plummet.

Many were focused on the stock price, as it related to their investment. The stock price of the Austrian Federal Railway Operating Group would directly determine everyone’s returns.

Even Franz paid close attention to this listing. If the Federal Railway’s stock soared, there would be no need to worry about the upcoming grand railway construction in Austria—it could be financed through the capital market.

Once the railways were built, whether the railway company was profitable or not would be of no concern to Franz.

Can’t be managed? No problem—the Austrian Government wouldn’t mind taking it over.

Worst comes to worst, they could issue a decree stating that any railway company incapable of ensuring regular operation would be nationalized. After all, an unprofitable railway would only be worth the price of scrap metal.

On this matter, the government and businesses have completely different standards for judging value.

For the government, it didn’t matter if the railway made money as long as the convenience of transportation stimulated the development of other industries, and the taxes from these industries were also part of the profit.

Plus, benefits in politics and military affairs also had to be taken into account. This is why in later times, many railway lines that were losing money still received government subsidies to maintain normal operations.

At the Belvedere Palace in the evening,

“Your Majesty, as of the closing this afternoon, the stock price of the Austrian Federal Railway Operating Group increased by fifty-six percent, closing at 15.6 Shields per share,” John-Steva said excitedly.

There was no doubt about it, as the stock market was a profitable business, and as the most influential Royal Bank in Austria, how could they not be involved?

Take the Federal Railway’s listing, for instance—leaving aside the rest, just the commission on issuing stocks amounted to hundreds of thousands of Shields. Although this big deal was a joint effort, the sum each party received was no small number.

Certainly, the commission was but a small income—the real profit came from being the market maker. With the stock market’s regulatory system not fully developed in that era, market makers had even greater room for manipulation.

Traditional industries in the financial markets had long been carved up; normally, no one dared to step out of bounds, because today you sweep my board, tomorrow I smash your spot, and no one wanted to trouble their own money-making.

The emerging industries were different; now was the time to seize land like in a horse race, and even financial giants were powerless against the sudden incursion of the Royal Bank.

John-Steva, too, was a man of finance and knew the so-called rules; it all came down to who backed you, followed by capital, and lastly, capability.

The capital of the Royal Bank sure couldn’t be compared with its peers, and its operational capability as a newcomer couldn’t surpass the old birds, but with such major backing, who could stand against it?

So it followed that everyone had to cooperate.

For John-Steva, encountering a surging stock price on his first maneuver was indeed a stroke of good fortune, and naturally, he was excited.

Franz joked, “You’ve done well; it seems your year-end bonus is secured.”

Once a management system is established, it must not be meddled with, and issuing bonuses haphazardly, as assumed by some, would not occur under Franz.

Having set policies and procedures, one must abide by them. The rewards depend on the performance achieved.

Handing out bonuses recklessly might bring short-term happiness, but as time passed, it would become clear that breaking rules was easy but re-establishing them was hard.

Not all projects are equally profitable; some require tireless effort without short-term return, yet they still need to be carried out.

When the boss breaks the rules, it inevitably creates massive troubles for the management, some of which may be irreparable.

The surge in railroad stocks was related to the global economy. Since the British economic crisis of 1847 ignited the European Revolution of 1848, the world economy suffered a recession of varying degrees.

By 1850, the world economy had recovered from the crisis and began a cyclical growth, with Austria’s economic growth outpacing the global rate.

The Austrian Government’s grand railway projects attracted capital from all over Europe, and the influx of speculative money naturally caused stock prices to soar.

Franz always welcomed such capital; money was not sinful, no matter who its master was.

Even when someone bought railway company stocks from shareholders, he turned a blind eye, as long as taxes were paid to the government, these were all legal actions.

In this era, the Austrian Government had no thought of rejecting foreign capital; it was the key moment of industrialization that needed a great deal of capital.

Reliance on domestic capital alone meant industrialization could be indefinitely delayed; using foreign capital to accelerate the process was not something Franz could refuse.

Just consider that the British, by investing in the construction of American railways from 1848 to 1858, had built over thirty thousand kilometers, ending up with disastrous losses.

It should be noted that in this era, the American population was only two-thirds of Austria’s; the vast, sparsely populated land was frustrating. From an investment perspective, Austrian railroads clearly had greater economic value.

It came as no surprise that some capital was diverted here, though Franz still underestimated the extent of British capital surplus.

As the first country to complete industrialization, the British leveraged this time gap to earn vast profits worldwide, which then transformed into cash flooding into the United Kingdom.

With an excess of money, it had to be spent, and yet the British colonial expansion was ongoing, with frequent uprisings; investing in colonies was too risky.

This money sought markets around the world, and under these circumstances, the grand railway plan promoted by the Austrian Government caught their eye.

A simple analysis would reveal that Austria’s population density exceeded that of the United States by tenfold, and since the reform by the Austrian Government, the domestic economic development sped on the fast track.

The British capitalists did not overlook the distant United States, and of course, Austria, being close in Europe, was not to be missed either.

An abundance of speculative money poured in, and it did not only flow into the railway sector. Government-supported industries like agricultural processing and manufacturing also became the darlings of capital.

By the second half of 1850, Austria’s economy displayed explosive growth, with nearly every industry growing wildly.

In this era, government rarely meddled directly with the market; there wasn’t the awareness for it.

Franz knew such economic development was unhealthy, and without limits, it would only be a few years before Austria suffered an economic crisis due to excess capacity.

To regulate or not? At this moment, Franz wavered. The economic crisis would bring devastating losses, but explosive growth also drove Austria’s industrial development and increased the country’s power.

This was what was known as taking a bold risk, rapidly expanding production capacity in a short time, leading to an economic crisis when reaching the limit.

After much hesitation, Franz decided to wait and see; after all, the outbreak was just beginning, and surplus production was still a long way off, wasn’t it?

The global economic crisis had just passed, and it wouldn’t erupt again in a short period. Since danger wasn’t imminent, the government could intervene before reaching the limit.