Chapter 293: The Delayed Rubber Crisis
While Europe was undergoing the Second Moroccan Crisis and the Italo-Turkish War, Arthur and the Royal Consortium were also busy with their actions in Europe.
First of all, the tense atmosphere in Europe due to these two events, along with the impending war, led to a sharp devaluation of many civilian factories and businesses across Europe, which even faced the danger of bankruptcy.
Not only in the stock markets of France and Germany, but also in countries like Britain, the Austro-Hungarian Empire, and Russia, the situation was quite bad. After the Italo-Turkish War, Italy's stock market also joined the downturn.
Of course, the devaluation wasn't as severe as it would have been in historical wartime situations.
If war were to break out, the devaluation of these companies would only intensify, making it an opportunity for Arthur, the Royal Consortium, and global investors to buy up assets at a low price.
After the war, the industries of the defeated countries would face bankruptcy, and it would be far cheaper to acquire them after the conflict than it would be now.
At the same time, the Royal Consortium was also significantly selling off some of its assets in Europe, including stocks of factories and companies it had invested in.
If they didn't sell now, there would be no opportunity left. The value of these companies would remain depressed for the duration of the war, except for those involved in military production.
However, military factories were important to the great powers, and the Royal Consortium currently didn't have the ability to interfere with the major military factories of these nations.
Moreover, military factories in the defeated countries would be liquidated after the war, and it wouldn't be too late to acquire valuable technologies from Krupp and other defense firms after the conflict.
The only difficulty in withdrawing investments was with the joint automobile factories built with British and German domestic powers.
In both Britain and Germany, the car factories were already enormous, employing tens of thousands of workers, making it nearly impossible to withdraw investments easily.
The good news, however, was that the relationship between Australia and both Germany and Britain remained strong. For Arthur's sake, both the British and German car factories would likely remain untouched by the conflict, though occupation was unavoidable. After the war, Australia could likely regain its interests.
It is also worth noting that during the Second Moroccan Crisis, the rubber crisis, which was originally expected to explode in 1910, was finally delayed.
The delay in the crisis was largely due to the success of Benz automobiles, which ushered in a more prosperous era for the rubber industry. The global development of rubber in this world was far more exaggerated than in the parallel world's history.
How exaggerated? By the end of 1910 and early 1911 alone, there were 200 rubber companies registered in East Asia.
However, the quality of these companies was uneven. Some were legitimate rubber producers, while others merely bought a plot of land in Southeast Asia and shamelessly registered themselves as rubber companies.
These companies' primary goal was to list their stocks in the East Asian stock market, selling shares to earn huge profits.
It's worth noting that because cars had already taken off worldwide, the rubber industry developed rapidly. Cars depended on tires, and tires were typically made of rubber.
This led to the rise of numerous tire factories across countries. Even if a country couldn't match Benz in automotive technology, they could still produce tires and make a large profit as tire suppliers for car manufacturers.
Take Australia as an example. The Royal Consortium had several rubber companies, and there were more than a dozen private tire factories across the country.
Although the Sydney Stock Exchange had only been established for a few months, Australia's more developed economy and similar culture attracted many European companies to register rubber companies there.
However, Arthur placed great importance on the Sydney Stock Exchange, and companies listed on it had to go through a certain vetting process.
At the very least, companies that only purchased land to register a rubber company had no chance of being listed on the Sydney Stock Exchange.
The East Asian stock exchange was different, though. It was controlled by a decaying nation, which led to outdated management and insufficient supervision of foreign companies.
Because of the lack of a unified and mature financial management system, East Asia's stock exchanges became a prime target for foreign capital and enterprises to reap profits.
The international price of rubber had skyrocketed since the birth of automobiles, rising from 2 shillings per pound to an outrageous 17 shillings per pound.
This caused the stock prices of almost every rubber company to soar, and newly registered rubber companies saw their stock prices quickly multiply several times in a short period, with some even increasing by several dozen times.
The Royal Consortium's rubber companies earned quite a bit from this boom. Even their securities company, just by helping a few companies list rubber stocks, made hundreds of thousands of Australian dollars.
Arthur even secretly supported many rubber companies to establish themselves in Southeast Asia and then list on the East Asian stock market to earn huge profits.
Arthur soon learned the true cause of the rubber crisis: Germany had successfully developed synthetic rubber technology and wanted to establish a synthetic rubber factory that would cooperate with the Benz automobile factory, even becoming one of its designated tire suppliers.
Historically, the rubber crisis of 1910 had been caused by the development of synthetic rubber technology, combined with the fact that the rubber industry had already reached its peak.
Upon learning that Germany had successfully developed synthetic rubber, Arthur wasted no time. He immediately ordered Kent, his butler, to direct the Royal Consortium to sell all their rubber company stocks as quickly as possible and for the Sydney Stock Exchange to temporarily halt the listing of rubber companies.
Not selling now would be disastrous. After the rubber crisis broke out, the price of rubber would plummet several times, and the stock prices of rubber companies would also fall to the floor.
If the rubber company stocks were held onto, the losses in the coming rubber crisis would far outweigh any previous profits.
However, to ensure the smooth sale of the rubber company stocks, Arthur shamelessly requested Germany to delay the official announcement of their synthetic rubber technology.
As compensation to Germany, Arthur agreed to allow the synthetic rubber factory to become one of Benz's tire suppliers. After all, the German factory would still be supplying tires to the German automobile companies; it was just a change in tire suppliers.
By mid-April 1911, the Royal Consortium had completed the sale of all their rubber company stocks.
A few days later, on April 20, Germany announced with great fanfare that it had successfully developed a synthetic rubber technology that was commercially viable and would build a synthetic rubber factory to replace the traditional rubber companies.
When Wilhelm II joyously made this announcement, the stock prices of German rubber companies immediately dropped.
Of course, this was only the beginning of the rubber crisis.
Shortly after, Germany, Britain, Australia, the United States, and other major rubber-importing countries announced that their rubber imports in 1911 would remain at last year's levels. This signified that the global rubber market had reached saturation and that the golden age of rubber had come to an end.
This news was devastating for the rubber market, as it represented the peak of rubber development, and demand had stagnated.
Any company or enterprise entering the rubber market from now on would not only fail to make profits but might even threaten the existing market.
More problematic was that, very soon, the world's largest automobile brand, Benz, through its German subsidiary, announced a collaboration with Germany's soon-to-be-established synthetic rubber factory, replacing natural rubber tires with synthetic rubber ones.
The role of automobiles in the rubber boom could not be overstated. Germany, the United States, Britain, and Australia were home to the four largest Benz automobile factories in the world.
This meant that the rubber market would not only stop expanding but would also rapidly contract in the short term.
These announcements had a devastating effect on the rubber market, and the stocks of rubber companies plummeted rapidly.
By the end of April, the price of rubber had dropped from 17 shillings per pound to 11 shillings per pound. In less than ten days, the price had decreased by more than a third.
More seriously were the rubber stocks. By the end of April, the price of rubber stocks on the London stock exchange had fallen to just a tenth of what it had been only days earlier.
Most rubber company stocks, which had been worth several dozen pounds per share, had now fallen to under ten pounds, with many even dropping to two or three pounds.
Of course, in highly regulated markets like London, the situation wasn't as bad.
But in East Asia, the crash was far worse.
Due to a lack of proper regulation, the East Asian stock market was filled with companies, many of which were shell companies. The number of stocks issued in the initial gold rush was enormous, but now, people were realizing their investments were worthless.
Stocks that had been worth a fortune were now worth nothing, and even worse, investors couldn't sell their stocks because no one was willing to buy them, leading to massive losses.
In just over a month, stock prices had dropped from several dozen pounds per share to just ten pounds, a few pounds, and even down to less than one pound.
Such prices were lower than the initial price of the stocks, illustrating how devastating the rubber crisis had been for the rubber industry and rubber companies.
Arthur estimated that in Southeast Asia, thousands of rubber companies went bankrupt because of this crisis, and the total losses were astronomical.
A few rubber companies, who had received advance warnings, had already cashed out when prices were at their peak, quietly walking away with large sums in pounds.
Meanwhile, ordinary stockholders who were unaware of the impending crisis only realized it when it was too late, finding themselves stuck with stocks that no one would buy.
(End of Chapter)
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