The Match King | Frank Partnoy

Summary of: The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals
By: Frank Partnoy

Introduction

Embark on a thrilling journey through the world of Ivar Kreuger, the ‘Match King,’ as we explore his daring ventures and financial schemes that shook Wall Street in the Roaring ’20s. In the book ‘The Match King,’ Frank Partnoy narrates the fascinating story of how Kreuger built his fortune by leveraging his charm, charm, and financial wizardry, ultimately leading to his astounding rise and tragic fall. Through Kreuger’s innovative financial instruments and cunning strategies, you will witness the birth of several complex Wall Street products and markets that still persist today. As you delve into Kreuger’s gripping tale, you will unravel the secrets that made him one of the most captivating figures in the world of finance, and learn the lasting impact his actions had on the global financial landscape.

The Rise and Fall of Ivar Kreuger

In the 1920s, Ivar Kreuger, a successful businessman known for his charm and wit, set sail to New York City to seek investments for his holding company Kreuger & Toll. Kreuger carefully manipulated conversations with wealthy investors to build their admiration and trust. The company’s success was founded on high dividends from investments in Swedish real estate, banking, filmmaking, and the primary business, Swedish Match Corporation. Kreuger’s new plan was to lend to governments in return for exclusive rights to sell matches in their countries. However, this plan ultimately led to his downfall and loss of investors’ money.

Kreuger’s Confidence

Ivar Kreuger, a self-made millionaire with grand monopolistic plans, met with Lee Higginson & Co. through their head of syndicate department, Donald Durant, to secure financing for his International Match Corporation. The bankers were taken by Kreuger’s cosmopolitan and confident demeanor and saw the potential to overtake rival firm J.P. Morgan & Co. With Lee Higginson & Co.’s help, Kreuger successfully raised funds for his company’s innovative convertible gold debentures. Kreuger’s brother, Torsten, was sent on a mission to propose Kreuger’s monopolies to governments in Latin America and Europe, beginning with Poland. However, Kreuger faced a major obstacle of getting his newly raised funds out of America and established the secret Continental Investment Corporation in Switzerland and Liechtenstein to move his funds and avoid U.S. taxes. Kreuger’s success was built on his unwavering confidence, as he believed that “Everything in life is founded on confidence.”

The Elaborate Ponzi Scheme of Ivar Kreuger

Ivar Kreuger, a young Swedish match manufacturer, went to extreme lengths to fund his double-digit returns to investors, ultimately creating an elaborate Ponzi scheme. By creating a web of subsidiaries, affiliates, and shell companies, Kreuger obscured the true nature of his business practices, making it nearly impossible for U.S. auditors to detect the scheme. Kreuger used off-balance sheet financing to hide his debts and fund his promise of high dividends. Despite these complicated tactics, Kreuger’s Ponzi scheme ultimately unraveled, and he was revealed to owe millions to investors. Despite warnings from auditors, Kreuger continued to insist that his businesses would grow enough to survive. In the end, Kreuger’s attempt to maintain his image as a visionary failed, and his investors suffered the consequences of his deceit.

The Rise and Fall of Ivar Kreuger

Ivar Kreuger was known as “the superman of finance” in the late 1920s. He secured a match monopoly deal with Poland’s government in exchange for a $6 million loan. To raise more money, he invented “B Shares,” each with only “1/1000 of a vote”, which enabled him to raise funds without ceding much power to investors. With complex arrangements that made it difficult for anyone to trace his monies in and out, Kreuger’s International Match became “one of the most widely held stocks in the U.S.” He then arranged to lend France $70 million for a match monopoly, which he raised through an innovative “convertible debenture derivative.” Kreuger’s success led him to build a 125-room Match Palace in Stockholm, travel extensively, and hobnob with celebrities and U.S. President Herbert Hoover. However, the stock market crashed in September, which led to his fall from grace.

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