Chapter 92: In My Eyes, You Are Nothing More Than Someone From the Past

Convertible bonds are a financial instrument situated between bank-secured loans and equity investments.

In a typical bank-secured loan or ordinary corporate bond, the borrower must provide evaluated assets as collateral. Once the principal and interest are repaid at maturity, both parties are settled; failure to repay results in forcible execution of the collateral.

Emerging companies unable to offer tangible, mortgageable assets often resort to offering company equity to attract venture capitalists who believe in their growth potential.

Convertible bonds strike a compromise between the risks and rewards of the above two methods: the borrowing process resembles that of a regular bond and requires collateral—but in this case, the collateral is company equity. If the borrower repays in full at maturity, the lender simply collects interest and departs. If not, the shortfall is forcibly covered by executing the pledged equity. Thus, the bondholder becomes a shareholder, much like a venture capitalist.

Because convertible bonds carry somewhat higher risk than ordinary bonds, their interest rates are several times higher. Legally, the maximum permitted rate is four times the current bank credit loan rate. With mortgage loans now at just over 5%, and credit loans at 7–8%, the theoretical maximum annual yield for convertible bonds at that time could reach 30%, which is tantamount to usury.

In practice, rates don’t reach the legal ceiling; usually, products offer annualized yields around 20%.

For business owners supremely confident in their company’s prospects—who believe their annual capital appreciation far exceeds 20%—this product is a sound option. Of course, investors must share this optimism; mere self-praise will not sell convertible bonds.

Due to the Southeast Asian financial crisis in 1998 and the bursting of the internet bubble in 2000, almost no venture capital institutions in China now believe that emerging enterprises can achieve annual growth far above 20% and repay on schedule. Thus, the convertible bond market is currently minuscule, and very few understand its workings.

Pan Jieying had only studied this topic in her MBA textbooks, without any practical experience. After listening to her cousin’s analysis, her eyes lit up briefly, but she soon became worried again:

“How does one handle this, and whom should I approach to make connections? I don’t know any fund investors specializing in convertible bonds, nor does my mother.”

At present, the CFO of Legendary Entertainment is still Gu Cheng’s aunt, Gu Wen, an accountant with over a decade of experience in state-owned enterprises. Her accounting is solid, and she manages corporate finance well, but she has almost no connections or insight in the investment world.

After nearly a year of entrepreneurship and as the business grew, Gu Cheng increasingly felt that the family-run enterprise could no longer keep up; more talent familiar with the capital markets was needed.

Gu Cheng naturally suggested, “Next year, we should find a new CFO to strengthen our capital operations. There are just a few months left this year, so Aunt will have to manage for a bit longer. As for this convertible bond investment, I plan to discuss it with Ma Feng and borrow Cai Zhongxin’s help for now.”

Pan Jieying was puzzled, “Who is Cai Zhongxin?”

“He’s the CFO of Ali Baba!” Gu Cheng kindly explained, knowing his cousin had been absorbing knowledge like a sponge over the past year, yet with so much to learn, some gaps in common knowledge remained.

“Cai Zhongxin is quite a figure. A Yale Law PhD, formerly an investment director at a German fund, earning $700,000 a year. Two and a half years ago, he had some business entrusted by a friend and met with Ma Feng. At the time, Ma Feng had just liquidated China Yellow Pages, and Ali Baba hadn’t officially registered; the team’s salaries were very low.

Cai Zhongxin spent half an hour boating on West Lake with Ma Feng, who dazzled him with grand visions. Cai then quit his $700,000-a-year job to join Ma Feng as CFO for 500 yuan a month. Later, all those venture capital investments in Ali were brought in by him.”

Pan Jieying was astonished, “He gave up $700,000 a year to work for 500 yuan a month? That’s—what nerve! It’s almost like gambling with his life.”

Gu Cheng allowed himself a mischievous smile, “You’re not much different. I said I needed a COO, and you volunteered for free. In the future, I must make sure you live more extravagantly than Cai Zhongxin, to make it worth your while.”

Pan Jieying blushed and pretended to smack him, “You rascal, daring to tease your sister!”

After chatting for a while, the siblings grew tired and slept on the plane. When they awoke, the flight had landed in Shanghai and they took a taxi back to Qiantang.

On the way, Gu Cheng called Ma Feng, saying he wanted Cai Zhongxin’s help in a few days and outlined his requirements.

Ma Feng readily agreed, joking over the phone, “If I help you secure the funds, just thank me with two percent.”

Helping raise two hundred million, with the intermediary getting four million in commission or kickback, is quite reasonable; that’s standard practice in the investment world.

When Gu Cheng first entered the industry, helping Ding Sanshi fake daily activity data for Nasdaq brokers, the total expenditure was about the same proportion.

Gu Cheng laughed and agreed without hesitation.

...

A week later, after hurriedly preparing, Cai Zhongxin arrived at Gu Cheng’s company accompanied by a fiftyish, balding business magnate.

Legendary Entertainment gave them a grand reception.

As Cai Zhongxin was about to introduce everyone, Gu Cheng’s eyes narrowed—he had already recognized the visitor.

“Well now, isn’t this President Sun? Old Cai, are you out of connections? I’m just issuing a bit of private debt, not seeking venture capital, and you bring out President Sun.”

The guest was none other than Sun Zhengyi, the president of SoftBank Japan and the principal shareholder behind Ali Baba and Ma Feng. Gu Cheng, now a year and a half into his reincarnation, was gradually becoming familiar with the prominent figures of this era.

Gu Cheng needed no introduction himself; his face had recently been exposed quite frequently, even if his wealth was not yet substantial.

Cai Zhongxin sensed from Gu Cheng’s tone that he might not welcome Sun Zhengyi’s involvement and smiled awkwardly, hastening to explain, “Sun’s SoftBank isn’t just a venture capitalist; they also handle convertible bonds. As for investment acumen, who could match President Sun?”

Sun Zhengyi scrutinized Gu Cheng for a long time without speaking, observing the young man’s eyes with remarkable composure.

Finally, after Cai Zhongxin’s efforts to keep the conversation going had run dry and all three were seated in the conference room, Sun Zhengyi spoke: “Young Gu, you’re very confident, it seems you’re not keen on our participation.”

Gu Cheng waved his hand in a conciliatory manner, “Not at all; it’s just that my current matters and funds are so minor, why trouble President Sun? There will be plenty of opportunities for cooperation in a few years.”

Gu Cheng’s tone was casual, his demeanor neither dismissive nor ingratiating, conveying an ethos akin to, “I urgently need to use the restroom—let me handle this and then we’ll talk.”

As if in the span of a bathroom break, his business would appreciate just a bit more. His confidence was palpable, almost thrilling, with eyes as bright as those of a gambler who already knows the outcome in Vegas.

Sun Zhengyi noticed this and, without uttering a word, regarded Gu Cheng with newfound respect.

Years later, rumors in the industry would say Sun Zhengyi possessed a unique talent for assessing investments—he was especially adept at reading entrepreneurs’ eyes. Through these psychological confrontations, he could discern whether founders truly welcomed investment or believed in their own inevitable success.

If Sun Zhengyi sensed that the entrepreneur’s gaze said, “I don’t want your money sticking around, I just need it to tide me over, and as soon as I make it, I’ll pay you back and cut you loose,” then Sun Zhengyi would deliberately do the opposite—if you wouldn’t let him invest, he’d insist on investing.

Ma Feng was a textbook example of this psychological duel. Many said Ma Feng was a master at painting grand visions and persuading people with his values. But even if he was indeed persuasive, he was the very best—so convincing he genuinely believed in his own stories. Only such people could “fool” Sun Zhengyi’s discerning gaze; even if they never asked for money, Sun Zhengyi would still go out of his way to press two million dollars of Series A funding into Ma Feng’s hands.

Compared to Ma Feng, Gu Cheng didn’t even need to go that far. He didn’t need to convince himself; he was crystal clear about his objectives and the direction of his success. His certainty was so great that he needed no prayers or spiritual comfort, no ghosts of idealism to sustain him.

My fate is mine, not Heaven’s; if Heaven stands in my way, I’ll defy it.

Gu Cheng never considered this overwhelming self-confidence particularly useful, nor cared if its ethos leaked out. Generally, it’s not a weapon, nor is there anywhere to use it. Like possessing anti-radiation missiles before defenders invent radar—such dragon-slaying skills are wasted.

Yet today, he happened to encounter Sun Zhengyi, whose gaze was as sharp as an ancient seer skilled in “reading the aura.” In Sun’s eyes, Gu Cheng’s aura was pure dragon and tiger, a dazzling spectrum—“invest quickly, do not miss!”

After a brief exchange, as soon as Gu Cheng finished presenting his financing plan, Sun Zhengyi attempted to alter his original intent.

“Young Gu, I think two hundred million isn’t nearly enough—if you’d like, I can offer you five times, even more. Provided we dispense with convertible bonds and go straight to venture capital.”

Gu Cheng made a dismissive gesture, “President Sun, I think it’s best to discuss venture capital in a couple of years. I am confident I can repay this loan.”

Sun Zhengyi suddenly raised his voice several levels, “How do you know what multiple premium I might offer? Perhaps the valuation I give your company today will already reach the highest peak you could imagine in two years—why won’t you let me invest?”

Gu Cheng sincerely counseled him to abandon such unrealistic ideas: “That’s impossible. You can’t imagine what I foresee for my company’s growth in two years—a person who’s never used a computer, no matter how boundless his imagination, could never grasp the scale of today’s hardware and software industries. In my eyes, you’re just an ancient man.”