your stock. Someone wants to sell a thousand shares of Ajax. They call me. I don’t go down to the floor of the Chicago Exchange waving ‘em around until a buyer happens along—I phone our broker in New York and he goes to Barrett’s post on the floor. Barrett buys the shares and makes a match with someone who’s looking for a thousand shares. If too many people are unloading Ajax at once and no one wants to buy it, he buys on his own account—he’s got an ethical obligation to make markets. Once in a great while, if the market gets completely haywire, he’ll ask the Exchange to halt trading in the stock until things shake out.”
She paused to give us time to order, Dover sole for me, rare steaks for her and Roger. She lit a cigarette and began punctuating her comments with stabs of smoke.
“From what I gather, something of the opposite kind has been going on with Ajax the last few weeks. There’s been a tremendous amount of buying. About seven times the normal volume, enough that the price is starting to go up. Not a lot— insurance companies aren’t glamor investments, so you can have heavy action without too much notice being taken. Did Barrett give you the names of the brokers placing the orders?”
“Yes. They didn’t mean anything to me. He’s sending a list in the mail . . . I wondered, if it wouldn’t be too great an imposition, Miss Paciorek, whether you’d look at the names when I get them. See if they tell you anything. Also, what should I do?”
To my annoyance, Agnes lit a second cigarette. “No, no imposition. And please call me Agnes. Miss Paciorek sounds too much like the North Shore . . . I guess what we’re assuming, to put the evil thought into blunt words, is that someone may be trying a covert takeover bid. If that’s true, they can’t have got too far—anyone with five percent or more of the stock has to file with the SEC and explain what’s he doing with it. Or she.” She grinned at me.
“How much stock would someone need to take over Ajax?” I asked. The food arrived, and Agnes mercifully stubbed out her cigarette.
“Depends. Who besides your firm owns sizable chunks?”
Ferrant shook his head. “I don’t really know. Gordon Firth, the chairman. Some of the directors. We own three percent and Edelweiss, the Swiss reinsurers, holds four percent. I think they’re the largest owners. Firth maybe owns two. Some of the other directors may have one or two percent.”
“So your present management owns around fifteen percent. Someone could carry a lot of weight with sixteen percent. Not guaranteed, but that would be a good place to start, especially if your management wasn’t aware it was happening.”
I did some mental arithmetic. Fifty million shares outstanding. Sixteen percent would be eight million. “You’d need about five hundred million for a takeover, then.”
She thought for a minute. “That’s about right. But keep in mind that you don’t need to come up with that much capital. Once you’ve bought a large block you can leverage the rest— put your existing shares up as collateral for a loan to buy more shares. Then you leverage those and keep going. Before you know it, you’ve bought yourself a company. That’s oversimplified, of course, but that’s the basic idea.”
We ate in silence for a minute; then Ferrant said, “What can I do to find out for sure?”
Agnes pursed her square face as she thought about it. “You could call the SEC and ask for a formal investigation. Then you’d be sure of getting the names of the people who are really doing the buying. That’s an extreme step, though. Once they’re called in they’re going to scrutinize every transaction and every broker. You’d want to talk to your board before you did that—some of your directors might not relish having all their stock transactions revealed to the piercing light of day.”
“Well, short of that?”
“Every brokerage firm has what we call a compliance
She paused to give us time to order, Dover sole for me, rare steaks for her and Roger. She lit a cigarette and began punctuating her comments with stabs of smoke.
“From what I gather, something of the opposite kind has been going on with Ajax the last few weeks. There’s been a tremendous amount of buying. About seven times the normal volume, enough that the price is starting to go up. Not a lot— insurance companies aren’t glamor investments, so you can have heavy action without too much notice being taken. Did Barrett give you the names of the brokers placing the orders?”
“Yes. They didn’t mean anything to me. He’s sending a list in the mail . . . I wondered, if it wouldn’t be too great an imposition, Miss Paciorek, whether you’d look at the names when I get them. See if they tell you anything. Also, what should I do?”
To my annoyance, Agnes lit a second cigarette. “No, no imposition. And please call me Agnes. Miss Paciorek sounds too much like the North Shore . . . I guess what we’re assuming, to put the evil thought into blunt words, is that someone may be trying a covert takeover bid. If that’s true, they can’t have got too far—anyone with five percent or more of the stock has to file with the SEC and explain what’s he doing with it. Or she.” She grinned at me.
“How much stock would someone need to take over Ajax?” I asked. The food arrived, and Agnes mercifully stubbed out her cigarette.
“Depends. Who besides your firm owns sizable chunks?”
Ferrant shook his head. “I don’t really know. Gordon Firth, the chairman. Some of the directors. We own three percent and Edelweiss, the Swiss reinsurers, holds four percent. I think they’re the largest owners. Firth maybe owns two. Some of the other directors may have one or two percent.”
“So your present management owns around fifteen percent. Someone could carry a lot of weight with sixteen percent. Not guaranteed, but that would be a good place to start, especially if your management wasn’t aware it was happening.”
I did some mental arithmetic. Fifty million shares outstanding. Sixteen percent would be eight million. “You’d need about five hundred million for a takeover, then.”
She thought for a minute. “That’s about right. But keep in mind that you don’t need to come up with that much capital. Once you’ve bought a large block you can leverage the rest— put your existing shares up as collateral for a loan to buy more shares. Then you leverage those and keep going. Before you know it, you’ve bought yourself a company. That’s oversimplified, of course, but that’s the basic idea.”
We ate in silence for a minute; then Ferrant said, “What can I do to find out for sure?”
Agnes pursed her square face as she thought about it. “You could call the SEC and ask for a formal investigation. Then you’d be sure of getting the names of the people who are really doing the buying. That’s an extreme step, though. Once they’re called in they’re going to scrutinize every transaction and every broker. You’d want to talk to your board before you did that—some of your directors might not relish having all their stock transactions revealed to the piercing light of day.”
“Well, short of that?”
“Every brokerage firm has what we call a compliance
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