Chapter 234: Performance

Dojin Industries’ top-floor executive office.

Executive Vice President Oh Seong-hak came to see me with a comprehensive report on the short-selling of Dojin Frontier.

“The block deal with short-selling forces, including Golden Edge, has been completed without any major issues.”

The first page of the report Oh handed me summarized the key transaction terms with various forces.

[Block Deal Results]

Price: $35.00 (fixed)
Settlement: T+1 (cash settlement)
Conditions: No Collar (no price limit), No Tape (over-the-counter transaction)
Settlement method: 6 transactions divided every 10 minutes
Special condition: Do-Not-Lend (short-selling not allowed)

“The profits from this transaction are summarized on the next page.”

Turning the page of the report,

The sales details of 490 million shares of Dojin Frontier held by DJ Capital and Trinity Holdings, among other subsidiary hedge funds, were revealed.

[Equity Settlement]

Sold quantity: 490,000,000 shares
Execution price: $35.00 (fixed)
Average price: $12.13
Realized P&L: $11.21B (490M x (35.00 – 12.13))

Total proceeds were a whopping $112.1 billion.

This amounted to about 12 trillion won in Korean currency.

The corners of my mouth naturally turned up.

“Thanks to the short-selling forces, it feels like we’ve made some easy money.”

“Haha, that’s not all. The profits from derivatives are also considerable.”

Judging by his expression, the profits seemed to have increased compared to the interim report I heard from Grant and Lisa last time.

I quickly turned to the next page of the report.

[Derivatives (Options) Settlement]

Ladder (Weekly/Monthly ATM/+10/+20/+35) cumulative realization: $8.6B (including previous realization of $3.1B / including partial liquidation of upper ladder and butterfly and delta hedge profits)
Remaining position: Gamma and Vega exposure reduced by 70%
Unrealized profit: $0.7B.

“Including the unrealized portion, does this mean we’ve made $9.3 billion from options trading alone?”

“That’s correct.”

Oh Seong-hak nodded with a satisfied look on his face.

Looking at businesses that are currently only reporting losses, such as electric vehicles and Luna Link, reports like this one can be a great comfort.

“The next page also summarizes the estimated losses of the short-selling forces, so it might be good to refer to it.”

“Oh… really?”

I was curious.

Just how much damage did the guys who messed with me in this investment suffer?

With anticipation, I turned the page of the report.

[Estimated Short-Selling Forces’ Loss Scale]

Total short remaining (previous): 560M shares
Covered in the last 5 trading days: -50M shares
Covered simultaneously with block execution (VWAP ~ $35): approximately 490M shares
Weighted average short entry price (estimated): $17.5~$21.0
Realized loss: $8.3B ~ $12.5B
Options (Gamma and Vega) loss: $2.6B ~ $4.2B
Total loss range: $10.9 ~ $15.1B

“The forces that hit shorts with high leverage took the biggest hit.”

Oh pointed directly to a few funds on the list of companies.

[Short-Selling Forces’ Damage List]

Sigma Capital

VaR exception triggered for the third time
Short and options loss $2.1B (estimated)
Some Pods suspended.

Delaware Partners

Loss $1.9B (estimated)
Weekly redemption restriction (Gating) notified
1 fund partially liquidated

QuantBridge

TRS unwinding forced equity cover
Short loss $0.9B (estimated), call option short loss $0.4B
Options desk completely replaced.

GoldenEdge

Prime (broker) position remained neutral
Equity loss $3.2B, options loss $2.7B.

In addition to the investment firms Oh pointed out, there were numerous small and mid-sized hedge funds.

All of them had suffered losses of at least hundreds of millions of dollars.

“All the companies listed here must be shedding bitter tears right now.”

“Three satellite funds that recklessly expanded following Golden Edge have collapsed, and most of the others are not in good shape either.”

“Well, if you bet on gambling, you should have been prepared for that much.”

“However… Golden Edge, which executed the largest short, suffered significant losses, but it’s not a problem.”

Golden Edge was a giant investment firm that unofficially controlled 12% of the global financial market.

There was no way a place like that would be shaken by this much (?) damage.

“Still, they’ve been hit hard this time, so they won’t be able to mess around with short-selling for a while.”

No matter how large the investment firm, a loss of over $6 billion was never an issue to be taken lightly.

“What do you plan to do with the proceeds from this transaction?”

Having made over $20 billion from equity and options trading,

It was necessary to decide what to do with that money.

“First, let’s repurchase about $1 billion worth of Frontier stock once the stock price stabilizes a bit.”

It was a bit overheated at the moment.

But there was no reason not to buy it, as it was sure to trend upward in the long term.

Of course, there were no plans to hold a large quantity.

If that were the case, it wouldn’t have been listed in the first place.

“And some of the remaining money should also be allocated to the Luna Link project.”

Along with the Leviathan propulsion system, Luna Link development was a money pit, so additional funding was essential.

“Dojin Frontier must be spending a lot of money on various things. Let’s call Park Cheol-jin to discuss that.”

“…Understood.”

Dojin Frontier’s conference room.

With Park Cheol-jin, Executive Vice President Oh Seong-hak, Director Cha Dong-hyuk, Director Kim Se-bin, Chilbong, and others in attendance,

I first explained the reason for calling the meeting.

“As you may have received through the secretary’s office, the reason for urgently calling this meeting is to review Dojin Frontier’s overall financial status, as we are simultaneously proceeding with large-scale projects such as electric vehicles, autonomous driving, and Luna Link.”

Park Cheol-jin, sitting to my left, stood up and naturally continued speaking.

“Then I will report on the previous quarter’s performance data.”

As I nodded,

The lighting in the conference room dimmed slightly, and slide data filled the wall.

[2018 Q1 Flash (Provisional)]

Sales: 13.17 trillion won
Operating profit: 382 billion won (2.9%)

As soon as the quarterly performance data was opened, Oh Seong-hak’s eyebrows furrowed deeply.

With quarterly sales exceeding 13 trillion won,

The profit was only 2.9%, or 382 billion won, so as the head of the Management Support Division overseeing the group’s finances, there was no way he could take these figures lightly.

Perhaps sensing the atmosphere, Park Cheol-jin coughed once before continuing his explanation.

“…Of the $100 billion that flowed in after Brexit, about $93 billion has been invested in Leviathan, autonomous driving platforms, electric vehicle development, and so on.”

Of the money earned from investments during the Brexit crisis, $100 billion was invested in Frontier.

Most of it had already been spent, and not much funding remained.

“First… let’s start with the details by business division. I’ll talk about the other things after I hear about that.”

At my words, Park Cheol-jin soon moved on to the next slide.

The front side summarized the performance and detailed project details of the construction sector.

“First, the construction and infrastructure sector.”

[Construction/Infrastructure - Quarterly Performance Summary]

Sales: 2.08 trillion won
Operating profit: 106 billion won (operating profit margin 5.1%)
Year-on-year: Sales +9.6%, profit +12.2%
FCF contribution: approximately 28% of the total

“Quarterly sales are maintaining an upward trend, and high-value-added infrastructure orders, in particular, are driving performance.”

He then explained the details by project.

[Construction/Infrastructure - Major Project Details]

(1) Global Data Centers

Location: Chuncheon, Busan, Europe (Poland, Warsaw, etc.), North America (Texas Austin, etc.), Asia (Tokyo, Japan, Johor Bahru, Malaysia, etc.)
Features: TIER-IV level energy efficiency, cooling efficiency index 1.08

(2) High-Strength Concrete and Protective Panel Business

Quarterly sales: 112 billion won (up 86% from 60 billion won in the previous quarter)
Main uses: Urban smart disaster prevention facilities, production facilities and structures within the group, military bunkers, space launch facilities, etc.
Overseas expansion: Expanding overseas application to Miyagi Prefecture Protection Center in Japan, smart fortress base in new city in Saudi Arabia, etc.

(3) Cost savings through direct construction of in-house projects

Applicable targets: Electric vehicle production plant, Leviathan propulsion system assembly facility, test building, Goheung Space Center, etc.
Effect: 30~33% reduction in construction costs compared to standard prices (elimination of redundant designs, utilization of 3D BIM modular construction methods)

(4) Expansion of overseas construction orders

Total order size: 2.9 trillion won
Completed projects · UAE offshore wind operation base · Vietnam communication satellite ground station · Canadian Department of Defense high-precision ammunition storage · Atrame Yanbu liquefied natural gas…

Compared to Dojin Tech’s sales, this was not much, but the fact that the construction sector alone had grown this much was by no means a bad result.

“At this rate, there won’t be much difference compared to Ahsung Construction.”

Executive Vice President Oh also seemed to positively evaluate the construction sector.

“Is defense next?”

“Yes, that’s right.”

Park Cheol-jin pressed the remote control to move the data to the next page.

“I will report on AGE sales first.”

[AGE-01 (Modular Rifle) Commercial Sales]

Orr Hakrav: $400 million
Republic of Korea Ministry of Defense: $0.80 billion
Total sales: $4.8 billion, operating profit $3.32 billion (profit margin 69.17%)

“Wow, the profit margin is huge.”

Director Kim Se-bin, upon checking the performance, couldn’t help but exclaim.

For a manufacturing company, a profit margin of nearly 70% was absolutely rare.

“Thanks to the representative’s successful contract with Goldon Ben Ari.”

Orr Hakrav was a privately held strategic weapons distribution company led by Goldon Ben Ari.

Even they had never bought a rifle for $100,000 each, and they kept trying to lower the price.

But they had maintained the price so far with the excuse that ‘performance and production costs are high.’

“Since we sold it expensively to Ben Ari. It’s supplied to our Ministry of Defense without any margin.”

Park Cheol-jin also nodded in agreement.

“Next is the performance of other defense sectors.”

[Defense Other/Expansion]

Total sales: 1.2 trillion won
Operating profit: 155 billion won (12.92%)

“Other defense sectors include military supply vehicles and field command post protective panels, localization of EMP and CBRN shielding materials, and distributed backup facilities for the Ministry of Defense Cyber Center……”

“Let’s hear the details about defense later.”

Considering the meeting would be long, I cut him off.

In addition to the ongoing projects in the defense sector,

There was a vast amount of content, including hybrid tactical armored vehicles, long-range hypersonic missile systems, and the Comprehensive Battlefield Information Integration System (CODEX), so it seemed better to schedule a separate time for it.

“Then let’s move on to mobility right away.”

Since that was the core reason for calling today’s meeting, I answered to do so.