Preferred Shares

Joseph saw no problem with letting the Austria build their own power plants. After all, the science involved was already public knowledge, and everyone understood the principles of power plants. If nothing unexpected happened, the Britain should be able to build their own power plants soon. At this time, taking advantage of this time difference to expand France power plants throughout the Europe continent, making the entire Europe's electricity dependent on France standards, would definitely be a good thing.

However, producing electric lights in Austria is a different story. The scientific principles behind electric lights are almost effortless; anyone with even a basic understanding of electricity can grasp how they produce light. But technically, electric lights are extremely challenging. They perfectly meet two requirements that make them difficult to copy: first, high manufacturing difficulty; second, special materials.

In the manufacture of electric lights, a crucial technical requirement is air extraction. The efficiency of air extraction directly determines the quality and lifespan of the light bulb. In this area, no one has the deepest technological accumulation as the France. Before publicly introducing the electric light, Bonaparte General Electric had already registered a large number of patents related to air extraction technology. While these technologies themselves are somewhat difficult, they aren't truly insurmountable. However, with these patents, Napoleon France possessed the ability to prevent any products infringing on France patents from being legally sold in most countries of continental Europe. Thus, these patents became a high wall preventing others from entering this field.

Of course, there are many other ways to create a vacuum, but the most common, cheapest, and easiest to implement methods have all been patented by Bonaparte General Electric. As a result, any foreign manufacturer that wants to bypass these patents will have to pay a huge price.

The second problem is the special nature of the material. In fact, anyone who buys a light bulb, breaks it on the ground with a thud, and takes out the filament can see that the filament is made of carbon. But the problem is that nobody knows what it is that was carbonized; at most, they can only know that it was carbonized from some kind of plant. And finding the right plant among various plants requires a lot of effort.

However, if France were to cooperate with the Austria in producing electric lights, even if the Austria's lights were only sold in designated areas, some related technical secrets could still easily be leaked. Therefore, after careful consideration, Napoleon instructed Metternich to inform him that France "did not have any particular view" on economic cooperation with Austria.

The so-called "not taking a special view" means that you can talk to others, and I don't care what the final outcome is. It's somewhat similar to the "we don't know what happens next" mentality of the later Kingdom of Nihon. In reality, it means: if it works out, I'll get a share; if it doesn't, the blame isn't mine, and it has nothing to do with me.

Metternich immediately understood that there was room for negotiation, but the France certainly had other demands. However, as long as there was room for negotiation, some kind of result could definitely be achieved, and if a result was achieved, he would deserve some credit and would be rewarded accordingly.

In recent years, the salaries of diplomats stationed in France, as well as France diplomats stationed abroad, have increased. While other countries still consider factors such as loyalty and competence when selecting ambassadors and consuls in France, other positions in embassies and consulates are generally filled by the highest bidder. This is because these positions easily facilitate business relationships with the France and allow for easy financial gains.

If their subordinates can get so rich, then the ambassadors or consuls, as their superiors, are certainly not just sitting idly by. Besides, promoting economic and trade exchanges between the two countries is one of the important responsibilities of ambassadors and consuls.

So a man named François, carrying a letter of introduction signed by Metternich, went to "Bonaparte General Electric" and began to talk to them about buying the factory.

The name "François" may be an alias, but the letter signed by Metternich is genuine, and more importantly, the deposit slip issued by the Bovan Bank is not fake. The amount of one million francs is clearly stated on that deposit slip.

So the two sides had a frank discussion about cooperating to make money. They quickly reached a basic consensus on most issues, leaving only one last problem: the filament factory that would be paired with the light bulb factory.

The France insisted that the Austria, with their limited technical and managerial capabilities, were simply incapable of managing a filament factory effectively. Furthermore, they argued that the Austria filament factory could become a loophole through which crucial trade secrets could be leaked. Therefore, the France proposed that the filaments be produced in France, then shipped to Austria for assembly, and finally sold by the Austria in designated areas.

However, François argued that doing so would only increase costs unnecessarily. Moreover, the France technical secrets are protected by patents, so concerns about technology leakage are unfounded.

Louis Bonaparte, representing Bonaparte General Electric, stated that the transportation cost of filaments is not high. Regarding patent protection, while it is generally well-established in continental Europe, it is far from adequate, or even nonexistent, in some more remote regions. For example, in Russia, although Russia patent law has just been enacted, its implementation remains uncertain. As for Turkey, the situation is even more unpredictable.

Of course, none of these are the most important things. The most important thing is to be wary of the Britain.

"The Britain were the first country in Europe to have a patent law, so no one knew better than the Britain how to exploit loopholes in the patent law. For one thing, in the Britain colonies, they had ways to circumvent the patent law."

For example, in India, we all know that most of India is actually under the control of the Britain East India Company. But at least nominally, there are still India princes in these areas, aren't there? The Britain could easily establish illegal factories in the names of these India, produce illegal products, and then sell them not only in India but also in Europe through smuggling. They could even simply have India using this name to set up factories in Britain, and we couldn't do anything about it, because it would be India, not Britain, doing the work!

In theory, we could only retaliate against other goods from one of India's princely states. But that's ridiculous; we don't have much interaction with India anyway, so what means of retaliation could we possibly have? Therefore, our concerns about the risks of technology leakage are not unfounded. Thus, at least for the time being, filament production cannot be carried out in Austria.

In fact, even in France, although we have several light bulb factories, we only have one factory that produces filaments. Moreover, from an economic point of view, it is not worthwhile to build a dedicated filament factory for a light bulb factory with limited output.

The latter reason is actually more convincing. After all, the Austria were ultimately doing this to make money. Moreover, Louis put forward a completely new counter-proposal.

"Furthermore, Mr. François," Louis said, "We have another suggestion. You know, the demand for electric lights is currently very high, and it's very profitable. So, naturally, we need to expand production. Well, this means we need to build more electric light bulb factories, and more filament factories. We welcome anyone willing to be our friend and make money together. Mr. Fritz, if you are interested in filament factories, I suggest you invest in our filament and electric light bulb factories. I wonder if you are interested?"

Building a light bulb factory and making money in the Balkans might yield some profits, but the total amount would be quite limited. However, acquiring a stake in "Bonaparte General Electric" would be like picking up free money. So when François heard this suggestion, his eyes lit up.

Just as Napoleon and Joseph had anticipated, this François was actually a representative of the Austria high command, and he was accompanied by a group of Austria nobles.

When France first reached peace with Austria and other countries, Austria actually harbored a desire to "rebuild its strength over ten years and then punish France for a year, with the intention of seeking revenge." However, after two years, they found that France was developing increasingly well, and at least for now, there was no sign of its impending collapse. The gap in national strength between Austria and France had also widened significantly. If, in the past, Austria, while unable to defeat France, could still inflict considerable damage if it fought desperately, now, even Archduke Karl felt that it would be difficult to confront France again, and even believed that, at most, he could only manage to splatter the France blood.

Faced with this perilous situation, a debate has begun to rage among the Austria upper class, with two opposing paths emerging. Some, led by Archduke Karl, hope to emulate France by developing industry and strengthening the nation's military. On the other hand, Emperor Fritz II is extremely cautious about any changes. He is deeply concerned that the development of industry and commerce will lead to excessive power among the common people, thereby disrupting the fragile balance within the empire and causing unforeseen consequences. However, he also understands that the situation has reached a point where change is imperative; if the empire continues to stagnate, its collapse will be almost inevitable.

Therefore, His Majesty the Emperor knew that he had no choice but to implement reforms, but he also couldn't proceed too quickly. If he went too slowly, he might be doomed; but if he went too fast, he would probably be doomed as well. It is said that because he was worried about suffering the same fate as his aunt and uncle, His Majesty the Emperor was so anxious that he couldn't sleep at night and lost a lot of weight.

It is said that Metternich later made a suggestion to His Majesty the Emperor, advising him to align his interests with those of France. He argued that by leveraging France power, social reforms would be easier to implement. Even if he didn't receive much support from France, as long as they didn't intentionally export revolution or cause trouble within Austria, the situation in Austria would be much more stable.

Now, the France have agreed to help Austria build power plants and electric light plants, which clearly aligns with Archduke Karl's and his followers' advocacy of "enriching the country and strengthening its military," or at least with the advocacy of "enriching the country." Louis Bonaparte's suggestion to invite the Austria to join "Bonaparte General Electric" also aligns with His Majesty the Emperor's desire to tie the interests of the Austria upper class, especially the Austria royal family, to France.

Although France is now a republic, Napoleon, as First Consul, wielded power far exceeding that of most monarchs, arguably no less than that of the "I am the state" Sun King. On the other hand, the Napoleon family's influence in France was equally astonishing, comparable to that of the Bourbon family in its heyday. If Napoleon weren't merely First Consul, not a king whose throne could be passed down to his descendants, His Majesty the Emperor might very well be considering a marriage alliance with Napoleon. After all, isn't marriage alliance a traditional Austria practice?

In short, François saw this approach as perfectly satisfying the hopes of both domestic factions. He then immediately inquired about the investment in "Bonaparte General Electric."

"Ah, Mr. François, you may not know, but 'Bonaparte General Electric' is a company with many investors. The Bonaparte Family actually holds less than 50% of the shares. In other words, we don't have complete control. This also means that any large-scale share expansion must be approved by the shareholders' meeting. However, as you know, we can't allow the overall shareholding distribution of the company to change too much. So, normally, even if a shareholders' meeting is held, under the current circumstances, the number of shares we can give up cannot be too large."

This statement disappointed François somewhat, but even a small stake would be good. So he quickly asked, "Then, what's the maximum number of shares we can get?"

Louis, upon hearing this, said, "Mr. François, as you know, everyone knows that Bonaparte General Electric is bound to make a fortune. This makes financing very convenient for our company; we can easily borrow as much money as we want from any bank at rates significantly lower than the market rate. Under these circumstances, I estimate that the shareholders' meeting will not agree to give up many ordinary shares to you. My personal opinion is that it will not exceed five percent."

The estimate of "no more than five percent" disappointed François. He knew that investing in "Bonaparte General Electric" would not only be politically significant but also economically profitable. However, a share of no more than five percent was simply not enough to make ends meet.

"Mr. Bonaparte, more funds can expand the business more quickly and make more money, so why restrict it so much?" François asked, frowning slightly.

"Because changes in shareholding will lead to changes in the power structure within the company, which in turn will affect the company's future development. And the company is currently developing very smoothly, so most shareholders naturally don't want the power structure to change too much. Therefore, shareholders naturally prefer to use loans to obtain funds for expansion rather than bringing in more partners. I think this is very natural and easy to understand, don't you think?" Louis explained, "However, perhaps we can cooperate in another way."

"What do you mean by the other way?" François asked quickly.

"Ah, Mr. François, have you heard of preferred stock?" Louis asked.

François shook his head, puzzled.

"Preferred stock" is stock that enjoys "preferred rights." Preferred stockholders have priority in the distribution of company assets and profits, and their risk is relatively low. However, preferred stockholders generally do not have voting rights in company matters other than those affecting their interests. Preferred stockholders also do not have the right to elect or be elected, and generally have no participation in the company's management. Preferred stockholders cannot withdraw their shares; they can only be redeemed by the company through the preferred stock redemption clause.

These "preferred shares" were actually invented by the Britain in the 16th century. However, due to the unregulated market and underdeveloped commerce at the time, the advantages of preferred shares were not fully realized, and they instead brought considerable management problems. Therefore, this practice was not widely used and was almost forgotten. In its original history, it wasn't until the 1820s that a Britain company, while developing a canal, encountered financial difficulties. They wanted to borrow money from banks, but the interest rates were too high. Issuing ordinary shares wouldn't attract new investors, so they reinvented the centuries-old "preferred shares," which proved a great success. Thus, this ancient "financial innovation" began to be widely used.

However, when Louis mentioned "preferred stock" to François, several centuries had passed since the first, less-than-successful attempt at it. Unless one was a specialist in this field, it was indeed unlikely that they would know the meaning of the term. Therefore, it was perfectly normal for François not to know it.

Louis then explained the concept of "preferred stock" to François, saying, "I think your primary reason for investing in our company is to make money. In terms of profitability, preferred stock isn't much different from common stock; in fact, it even offers some advantages in dividends. And I believe you're quite satisfied with our company's current operations and future prospects, and you probably don't want to change our business model or development strategy. Therefore, preferred stock is a solution that perfectly suits the needs of both of us."

Something happened at school, that's all for today.