Chapter 1023: Giving the Netherlands a Little Financial Shock
However, the news censorship, far from stabilizing the stock price of the Dutch East India Company, served only to ignite a firestorm of panic within the market.
While almost every newspaper was filled with articles claiming that "the situation at the Cape of Good Hope will not have a significant impact on the East India Company," the citizens of Amsterdam were clearly more inclined to trust information coming from other channels.
For instance, the pamphlets that had begun appearing in massive quantities across the streets.
As early as the day De Witt received the Crown Prince's orders, the printing houses in Brussels had begun secretly preparing these booklets—a task that the French Press and Publication Bureau, having been seasoned by large-scale propaganda wars, handled with practiced ease.
This wave consisted of over thirty thousand pamphlets of varying styles that flooded into Amsterdam.
One must consider that the total population of the city was only a little over one hundred and seventy thousand. This was essentially one copy for every household.
The content of the pamphlets focused primarily on the British offensive in South Africa, analyzing the devastating blow the East India Company would suffer after losing the Cape of Good Hope. The conclusion was inevitable: record-breaking losses.
It was true that the Dutch East India Company had been losing money since the Fourth Anglo-Dutch War ten years prior, but the amounts had remained within the public's psychological threshold of endurance.
The Dutch people had been gritting their teeth and holding on, waiting for the company to find a new source of wealth and turn its losses into profits.
Immediately following this, a massive volume of sell orders for East India Company stock appeared on the market.
Naturally, this was De Witt’s handiwork.
Although he possessed only 330,000 Dutch Guilders in capital—roughly four million Francs—he followed the operational methods taught to him by the Crown Prince to "sell off" over 2.4 million Guilders' worth of East India Company stock.
This had started a week earlier.
In a villa in the eastern part of Amsterdam, the renowned major investor Acosta handed a signed contract to the "Scotsman" standing before him. "Mr. Maen, I wish you luck."
Though he found it difficult to understand what this "Scotsman" was trying to achieve, the latter had offered him a guaranteed, profitable business deal.
He only needed to "lease" 40,000 shares of Dutch East India Company stock—valued at 400,000 Guilders—to Maen, and he would receive a direct fee of 4,000 Guilders for the favor.
Of course, Maen did not have 400,000 Guilders to pay him, nor would he take the physical stock away. Instead, everything was placed under the supervision of the Bank of Amsterdam—including the shares themselves and the capital generated from selling them.
On top of this, Maen deposited 40,000 Guilders in cash at the Bank of Amsterdam as risk collateral.
Should Maen’s operations result in a loss reaching 40,000 Guilders—the limit of his deposit—the Bank of Amsterdam had the right to immediately recall the batch of shares.
The bank would then return both the shares and the collateral to Acosta.
In other words, the latter faced absolutely no risk while pocketing a cool 4,000 Guilders for doing nothing.
This was, in fact, a leveraged short-selling operation common in later centuries, yet it perfectly circumvented all the anti-shorting regulations of the Amsterdam Stock Exchange.
Actually, more than a century ago, the Dutch stock market had already seen the emergence of "naked short selling" as a means of driving down prices.
A person would gather a large group of people who held a certain stock to form a short-selling alliance.
These individuals would then begin dumping the stock onto the market. However, due to the low efficiency of trading in this era, many transaction orders would not actually be settled until several days or even half a month later.
Before that happened, they would sell the stock to others again.
This quickly created a surge in market supply, causing the stock price to plummet.
At that point, the short sellers would buy back the stock at a low price to complete the actual delivery, walking away with the profit.
Consequently, starting from the end of the 17th century, the Dutch stock market had tightened its regulations, banning "transactions without actual stock delivery."
This meant that if a short seller wanted to create a sufficient impact on the market, they had to possess a massive amount of stock, which required investing enormous sums of capital beforehand.
Using Joseph’s method, the short seller did indeed possess the stock and could settle the transaction immediately.
At the same time, by only preparing a small amount of collateral, they could apply ten or even dozens of times the leverage—as long as the stock price continued to fall, they would never face a margin call.
Thus, De Witt used less than 200,000 Guilders to trigger a massive sell-off worth 2.4 million Guilders.
And these were real sales, not "naked" ones.
Maen was simply one of the several traders working under him.
Currently, De Witt still held nearly 100,000 shares of the East India Company to maintain the rhythm of the market crash.
The heavy selling, combined with the various negative reports regarding the Cape of Good Hope, caused the East India Company’s stock price to spiral downward.
Although the Dutch government injected nearly 1.5 million Guilders to stabilize the market, in just over ten days, the price had fallen to 397 Guilders per trading unit.
That was a staggering drop of twenty-four percent!
At noon on April 11, when the East India Company’s stock price hit the psychological threshold of 400 Guilders, market sentiment completely shattered.
Without De Witt needing to lift another finger, the citizens of Amsterdam began panic-selling their shares. The scene was one of widespread devastation, a landscape filled with the metaphorical cries of the suffering.
The Dutch Prime Minister, Schimmelpenninck, sought to legislate a ban on the ubiquitous pamphlets, but he faced opposition in Parliament from the rival parties, who argued that such a move contradicted the spirit of freedom of the press.
This was the current helplessness of the Dutch Parliament.
The ruling party’s approval was low, and the opposition parties were more than happy to see a disaster unfold, hoping it might pave their way to power.
However, the situation at the Cape was now known to all. Even if they forcibly confiscated every pamphlet, it would have little effect.
As the East India Company's stock reached the 420 Guilder mark during its descent, the content of the pamphlets flowing into Amsterdam changed once more.
"A Historic Disaster: Who Is Responsible for the East India Company's Plight?"
"It was the British invasion that destroyed the East India Company, and with it, our lives."
"The British have stolen the hen that lays the golden eggs. How will the East India Company profit now?"
Some newspapers even defied the censorship and began publishing similar content. The directors, journalists, and printers of these papers had all lost significant money because of the company's crash; their fury had long since conquered their fear of the ban.
With the previously incited nationalistic fervor now coupled with tangible economic loss, protests began to break out in the streets of Amsterdam, demanding that the government send troops to reclaim the Cape of Good Hope.
Of course, the Netherlands currently possessed no strength whatsoever to challenge the British...
In the square before the Amsterdam Stock Exchange, a young man with brown hair stood upon the base of a statue, raising his arms and shouting to the crowd, "The shameless British are invading our Cape of Good Hope!
"The cannons the British used to bombard the Cape were cast from steel ingots produced by the Kovak Steel Company in Birmingham!
"And that very company was built using our money!
"While the East India Company's stock price was crashing, their own stock price actually rose by twelve percent!"
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