“The pasta?” Higgins questioned with his upper-crust London accent. “Orecchiette with sweet sausage, broccolini, touch of ricotta. Sounds marvelous.”
“Ah, gives me a hard-on just to think about it. Of course. Times four, what do you say, guys? Cold day, calls for some soup, I think. The other special, squash soup, little bit of cream, am I right, Max? All around, sir, if you don’t mind.”
The waiter agreed it was a great selection. Edmund made a point of looking at his menu a couple of beats longer, then folded it and handed it over. He was too upset to protest. Now Trotter was swirling the red wine around in his glass. It was a lovely ruby color and on another occasion, Edmund would have been rhapsodizing about it.
In the often flamboyant world of hedge fund management, Jerry Trotter was something of a celebrity. He’d already enjoyed one very successful career as a plastic surgeon, catering mostly to the moneyed ladies of New York’s Upper East Side, for whom he performed face, eye, and buttock lifts. In truth, Trotter was a better showman than he was a surgeon. He knew, like everyone in the medical profession, that during medical training grades counted more than the need to display particularly good physical skills in obtaining training positions in such surgical specialties as the eye or brain, or in plastic surgery. Trotter had made sure he always got good grades to make up for his hand-eye coordination, which was poor enough for him to find surgery a taxing grind. But that was in the past, and he didn’t need good hand-eye coordination to manage money.
Trotter had always enjoyed looking after his own money and taking the odd risk here and there. After years of working six days a week at his practice, he had a lot of it to manage. Trotter had known Max Higgins for years and well enough to know he was keen to strike out on his own from his trading position at Goldman. Trotter made a proposition to Higgins: we’ll set up a fund, you run it and teach me what you know, and I’ll supply the money. It worked, and Trotter quickly found that his patients trusted him and were grateful and many were happy to let him invest for them. Trotter was a quick study and soon his fund, the immodestly and unimaginatively named Trotter Holdings, was heading toward the middle rank of name funds.
“So, Edmund, Russell, what was so urgent that we had to meet today?”
Russell looked over at Edmund before he started. The delay in Trotter being able to meet with them had at least allowed Edmund and Russell to decide how they were going to present their news to Trotter. They’d sat in a diner on Lexington Avenue for an hour and strategized.
“We have a potential public relations issue we want to give you a heads-up about. We thought you might be able to help us get out ahead of the possible publicity-nip it in the bud, so to speak.”
“Edmund, has your checkered past finally caught up with you?” Jerry asked, not sounding as though he was joking at all.
“We’ve heard about some medical research that’s taking place,” Russell continued, to spare Edmund from having to respond. “It’s at an experimental stage, with no guarantee it’s going to work or anything, but in some quarters it’s being taken more seriously than in others.”
“How does that affect LifeDeals?” asked Jerry, who glanced between Edmund and Russell even though it was Russell who was speaking. All the joviality had left his voice. The two waiters brought over the soup and left it quietly, detecting the tension at the table.
“It may not mean anything,” Russell added. “As I said, we want to get ahead of any potential bad publicity.”
Jerry Trotter picked up his spoon and tasted a mouthful of soup. It was delicious, of course, but when he sensed he was about to hear something unpleasant, his appetite faltered. “Russell, you’re going to have to tell me a little more clearly what’s going on.”
“Okay, Jerry, sure. There are a couple of researchers at Columbia who think they can grow artificial organs using human stem cells that they make from a patient’s own cells. Obviously I don’t know the details, but the process is called organogenesis. It’s supposed to start what will be called regenerative medicine. If they can grow new pancreases, for example, they can help people with diabetes live longer. But at this point, it’s a huge ‘if.’”
“I read something about that idea in some research we did on our due diligence for LifeDeals, but it sounded like science fiction,” Jerry said.
“Apparently not anymore. The future is now, as they say. Or it might be,” Russell said.
“How many people know about this?” Max Higgins asked.
“Not many,” Russell said. “Outside Columbia and the stem cell field, very few is my guess.”
“How did you hear about it?”
There was a pause. This was where it was going to get a lot trickier.
“Gloria Croft told us,” Edmund said.
Max Higgins quickly figured out the implications and, way ahead of Trotter, asked Russell the main question.
“Is she taking any action?”
“Yes.”
“And knowing Gloria, she’s shorting LifeDeals, am I right?”
“Yes.”
“Hold on, hold on, wait a second,” Jerry said. “LifeDeals is being shorted because of some work being done in a lab at Columbia?”
“I’m afraid so, Jerry.”
Higgins went on, “Am I to assume that some numbers have been run looking at cash projections based on a potential breakthrough in diabetes treatment? And that the projections don’t look so good?”
“Is he right?” Trotter asked. Higgins had got right to the heart of the matter in seconds.
“Broadly, but look-”
“So he is?” Trotter questioned.
“As I said, it’s early in the-”
“Would you mind telling me how this . . . this fucking disaster is what you would describe as a public relations issue?” Jerry was hissing, using his soup spoon to point first at Edmund, then at Russell. The table was silent until Max Higgins spoke up again.
“The science may fail eventually, but with Gloria Croft taking a position, investors are going to be alarmed when they find out. Then it becomes as much about Gloria as about the science. She’s a barometer. So from that perspective, they’re right, Jerry, it’s a PR problem first.”
“And if the science succeeds?” Jerry said.
“Then we have a bigger problem,” said Edmund.
Jerry put down his soup spoon and took a large drag on his $30-a-glass Barolo.
“You guys didn’t see this coming?”
“Obviously not,” Edmund said. “It’s a once-in-a-century breakthrough if it happens. You can’t do projections for being hit by an asteroid.”
No one was eating now. The waiter, coming by for a second time, asked if anyone was still working on their soup and no one was. Yes, the soup was fine, but everyone was preoccupied. The uneaten soup disappeared.
At Jerry’s insistence, Russell walked him through what they knew of the research. He made a point of saying that there was no guarantee it would succeed; the odds had to be that it wouldn’t because in the vast majority of research projects there was always some major unanticipated obstacle that would arise to thwart the hoped-for result.
“So what are the chances it will succeed?” Trotter questioned.
Edmund said there was no way to know. He then had Russell talk about the effects such an eventuality would have on LifeDeals’ cash flow. As Edmund and Russell had agreed before meeting with Trotter, Russell erred on the conservative side.
“What’s our position vis-a-vis the public offering?” Jerry directed his question at Max, his partner. He didn’t care that he might offend his lunch hosts.
“The lockup period expires May thirty-first,” Max said.
When an investor takes part in an initial public offering, they can’t sell their shares for a certain amount of time, in this case 180 days. Trotter Holdings was halfway through the mandated blackout period, meaning that Jerry Trotter and his fund were stuck with his shares for another three months.
“Shit. What are the chances of Gloria Croft keeping her mouth shut for three months?”