Inside 'The Match King'
Title: The Match King: Ivar Kreuger, the Financial Genius Behind a Century of Wall Street Scandals
Author: Frank Partnoy
Publisher: Public Affairs, 2009
ISBN-13: 978-1586487430, 288 pages
Review: The Match King
By Patrick Brigger, getAbstract
Readers who love fascinating stories with unforgettable characters will thank professor and market expert Frank Partnoy for his book on 1920s business icon Ivar Kreuger. This remarkable figure was a global financier, Greta Garbo's close companion and an adviser to prime ministers, kings and a U.S. president. Though he was one of the world's greatest con men, he has somehow slipped, all but forgotten, from popular history. Partnoy resurrects Kreuger in all his tragic glory: a successful, well-known entrepreneur whose abrupt fall from grace and apparent suicide--by a bullet through the heart--coincided with the Great Depression. Kreuger's financial chicanery led to comprehensive U.S. securities reform in the early 1930s.
getAbstract considers this business biography a rollicking good tale. It holds particular lessons for those looking to make sense of recent financial history: how a brilliant businessman made some innovative--and eerily familiar--promises to greedy, willfully ignorant investors.
Across the Ocean to Get Money
In 1922, Ivar Kreuger traveled on the German cruise ship Berengaria from Southampton to New York City--the destination for entrepreneurs seeking money. In the Roaring '20s, everyone wanted to get rich on the next big deal. A hugely successful Swedish businessman, the 42-year-old Kreuger quickly impressed his fellow passengers with his wit, charm and business acumen. He carefully planned every conversation with these wealthy voyagers, striving to create the perfect impression. He would need their goodwill, admiration and, later, their money.
Kreuger's holding company, Kreuger & Toll, routinely paid 25-percent dividends based on its investments in Swedish filmmaking, real estate and banking, and in Kreuger's primary business, the Swedish Match Corporation, which produced two-thirds of the world's safety matches. His new plan: raise money in the U.S. to lend to governments in return for rights to sell his matches exclusively in their countries.
At the time, Lee Higginson & Co., known as Lee Higg, was one of New York's leading investment banks. Kreuger cleverly maneuvered to meet Donald Durant, head of its "syndicate department." He detailed his monopoly plan to Durant, who arranged for him to meet the firm's partners for lunch at its offices near Wall Street. Kreuger was an instant hit with the bankers, who agreed to help secure financing for his new venture. They viewed the impressive Kreuger, with his perfect manners, cosmopolitan air and confident demeanor as "the whitest of the white shoes." Plus, they believed that he might give them the opportunity to overtake their primary rival, the mighty J.P. Morgan & Co.
Kreuger and Durant soon embarked on capital-raising road shows. They set up a new company, the International Match Corporation, in tax-advantageous Delaware. The initial shareholders were Swedish Match and a number of Swedish banks. The new firm issued convertible gold debentures, or bonds redeemable in either cash or gold. Lee Higg quickly sold $15 million worth of the innovative paper, "one of the largest security issues of the year." Kreuger sent his brother, Torsten, to act as his emissary in proposing the monopolies to governments in Latin America and Europe, starting with Poland. Kreuger's scheme was off and running, but he had one major problem: getting his newly raised funds out of America...
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