ZS | Chapter 20

The first bad news of 2025 was that just after Zhuo Hang sold Baiyuan Xincai at 350 yuan per share, the stock price rose to 400 yuan per share.

That meant that Zhuo Hang's 110 million yuan position in Baiyuan Xincai had lost nearly 15 million, margin included, in just one week.

The stock market changed in an instant, and sitting still waiting to die would only make him a leek. After the close on the first trading day of the week, Zhuo Hang made a prompt decision and drove overnight to Xiangcheng. The next day, disguised as a business partner, he went into Baiyuan Xincai's factory for an inspection.

The most common shorting tactic was to issue a research report proving that the company had principled problems, use negative information to quickly stir public opinion, and push down the stock price.

In the age of fragmented information, netizens were exposed to too much financial news, and to catch people's attention, a 3-5 page research report was far from enough. So Zhuo Hang needed to combine the situation at Baiyuan Xincai's factory and make a detailed 30-50 page PPT, throwing out negative information that could deal a heavy blow to the company.

The staff received Zhuo Hang very warmly, took him around the factory, and explained in detail the whole chain of the product from research and development to production, then to sales, and finally to application.

Only after Zhuo Hang entered the factory did he learn that Baiyuan Xincai's factory had no grand exterior decoration because all the money had been spent on the internal production equipment.

After the tour, Zhuo Hang said he wanted to wander around on his own, and after the staff left, he went to the dispatch room.

Three or five trucks were loading goods, and Zhuo Hang asked the truck driver, “Sir, our company's output value is nearly 100 million, so why are there so few trucks?”

The driver, cigarette in his mouth, said, “We produce new fireproof materials, ten times more expensive than traditional building materials. Only large factories can afford them. The state ordered enterprises and institutions to carry out fire safety corrections and required everyone to use new fireproof materials. Our business has increased, and we were just preparing to add more vehicles.”

Because they sold new fireproof materials that were ten times more expensive than traditional building materials, the number of trucks used for transport was ten times less than the estimated amount, so the company was not suspected of financial fraud.

Zhuo Hang felt as if he had fallen into an ice cave.

Baiyuan Xincai's factory facilities were complete, its operations standardized, all procedures were in order, and there were no principled problems... Shorting the company was as difficult as shorting Tesla.

More than a hundred short sellers had all issued reports saying Tesla was not good, and the reason Tesla's stock price surged wildly was that investors cared more about Tesla's thriving reality than the short sellers' data reports.

Zhuo Hang hated himself for having judged that the company was suspected of financial fraud just because Baiyuan Xincai's stock price had risen rapidly and the number of transport trucks was small, and for having tricked Gu Zheng into putting in 100 million.

－－Yuxi ZhengliＱ

He hated Cheng Zhi even more for insisting on video calling him nonstop before he went into the factory for the inspection.

If it were not for Cheng Zhi pestering him, if it were not for that birthday, if Gu Zheng could resist the temptation and not give him the money... maybe this round would not have left him broke.

Because he was certain he would not lose money, the contract stated: Gu Zheng would bear 10% of the risk or profit. Yesterday Baiyuan Xincai's closing price was 400 yuan, and after Monday's opening the stock price might still rise.

That meant if he closed the position now, he would have to pay Gu Zheng back all the money he had earned over the past half year from stock speculation, gold trading, and futures trading.

Without his principal, in the future he would only be able to lie flat like his parents, and there would be nothing he could do even if he wanted to make money.

Zhuo Hang did not want that.

To preserve his principal now, he could only use very extreme means.

After thinking in the car for a moment, Zhuo Hang lit a cigarette and dialed Gu Zheng's number.

*

The young master had worked like a dog in Lanhai for a week, and at last could sleep in on the weekend, but the phone rang and woke him, leaving him with a lot of resentment.

“Hello.”

If it were an insurance salesman, he would have to curse you twice.

"It's me."

Hm? This voice...

Gu Zheng woke instantly, his tone turning a little gentler as he said uncertainly, “Zhuo Hang?”

“Mm.”

“How is it?”

Gu Zheng classified Zhuo Hang's lack of refusal last time as liking him, and automatically assigned the other man the identity of a suitor.

You knew I was working and couldn't bear to disturb me, so you came to find me at noon on my day off. You're really clingy!

The other man seemed a little nervous, his voice pausing before he said, “I want to tell you a story.”

Oh, to wake me up, you even specially prepared a little wake-up story.

Gu Zheng hugged his phone and rolled twice on the bed, the corners of his mouth rising wildly in excitement, but he also felt he should be restrained with his suitor, or he would seem too cheap. So he deliberately lowered his voice and tried his best to make his tone sound cold, “Go on.”

Zhuo Hang said, “Two accomplice criminals were locked in prison. Because the officer had no conclusive evidence, he interrogated them separately. If both of them did not turn in the other, then because the evidence was uncertain, neither one would be sentenced; but if one turned in the other and the other stayed silent, then the informer would be released for meritorious service, while the silent one would go to prison; if they turned in each other, the evidence would be conclusive, and both would go to prison.”

“If the ones caught were us, what would you choose?”

When he was in school, Gu Zheng hated microeconomics the most, and compared with those game theory models on paper, he was more interested in real merger and acquisition cases.

Zhuo Hang was talking about the classic prisoner's dilemma game theory, and the question he threw out was just like asking who you would save if I and your mom fell into the water at the same time, or how many of eight Swiss rolls I would eat.

Ha, he definitely had no confidence in himself, so he wanted to use a killer question first to interrogate my soul.

Gu Zheng played along, “Definitely choose not to inform.”

“We both know not informing is the best choice, but in fact, because the prisoners cannot trust the other side, they tend to inform on each other rather than remain silent together. Zhuo Hang's voice sounded a little sad, “Because the best choice for the individual is not the best choice for the group, even when cooperation is beneficial to both sides, it is hard to maintain cooperation.”

Wait, why was he suddenly lecturing me?

Could it be that because we hadn't contacted each other for a week and he had no confidence in pursuing me, he was deliberately stringing me along and playing hard to get?

Gu Zheng straightened his chest and guaranteed, “If something really happened to us, even if the police beat me to death during interrogation, I would absolutely never betray you!”

A light laugh came from the other end, and through the receiver Gu Zheng heard a chilly breath, as if Zhuo Hang were speaking right against his ear.

“We really did run into trouble.” Zhuo Hang still spoke in the same flat tone, “Baiyuan Xincai's stock price went up.”

“What!!!” Gu Zheng flipped up like a carp and sat up on the bed in an instant, with no thought left for flirting, “How much did it rise?”

“15%”

Gu Zheng opened the stock trading app and felt half his heart go cold when he saw the stock price.

Zhuo Hang was not playing a hard-to-get flirtation game, the stock price had really risen!

If Mother knows I lost ten million in a week, she will definitely skin me alive.

Zhuo Hang said, “If you look at the A-share stocks that had previously been shorted, such as SMIC International, Tongwei Co., and China Yangtze Power, Baiyuan Xincai's rise fully matched the high-valuation stock model, so I really had not expected the stock price to keep rising.”

Gu Zheng was in a rage and had no time to care about his suitor's feelings, so he shot back immediately, “I don't care about any bullshit model. Right now I'm losing money! I trusted you, and in the end you made me lose ten million!”

Zhuo Hang delivered the prepared line, “I, like you, put in 100 million. Now that the stock price has risen, I not only have to bear the loss, I also have to compensate part of your loss. If you are unhappy, I am even more upset.”

Last time the one playing with snakes got bitten, and there was nowhere to argue reason, this time I definitely had to change my ways and could not be seduced again.

Unless you stripped naked, lay on the bed, and apologized to me!

Gu Zheng puffed up in anger, “Last week you seduced me into signing the contract, then kissed me and forced me to transfer the money; just now you first laid the groundwork with prisoner's dilemma, then said you had squandered my money. You are just fraudulently taking my money on purpose!”

Zhuo Hang stated the objective facts, “I did not scam you. We were both in a mutually willing cooperative relationship. I wanted the stock price to fall even more than you did, but the fact is, it rose.”

“The clear-eyed way of trading stocks was to let everything happen.”

“You were clear-eyed, but my heart hurts!” Gu Zheng hammered the pillow, almost fuming, “What kind of good person could play heart-pounding games with you every week? My heart is about to be ruined by you!”

Zhuo Hang first used the prisoner's dilemma model to make Gu Zheng choose the same side as him; then falsely reported that he had invested 100 million, to win Gu Zheng's sympathy.

Because if he wanted to turn the tables, he had to pull Gu Zheng into the game.

He had thought that given Gu Zheng's temperament, he would definitely curse him out to the heavens, but he had not expected that although Gu Zheng was angry, he did not say anything too extreme.

Zhuo Hang continued to dangle the bait and said by retreating in order to advance, “Actually, there is not no way to turn the situation around now. It's just that there will be a relatively big risk and an extremely low probability.”

If the crazy bastard wanted to turn a loss into profit, he would not talk about risk, and even less would he mention his major mistake as the operator during the work inspection. What he had to do was take advantage of Gu Zheng's hot-headed state to guide his attention to the way to break the deadlock, so that he would cooperate with him.

Sure enough, Gu Zheng bit, and asked, “What method?”

Zhuo Hang said, “When the price of a certain high-valuation stock stayed high, huge capital could be used to directly suppress the stock price and lead the market to pull back. This operation method was called

capital shorting.”

Both of them felt bad when the stock price rose, and since Zhuo Hang had a method, he was of course willing to cooperate.

Gu Zheng asked, “What do you need me to do?”

Zhuo Hang said, “Before the Zhuoshi asset restructuring, I used the money from stock trading to repay Zhongwei Construction 300 million. The boss at Zhongwei appreciated me for keeping my promise and often consulted me about investment business, and his liquid assets were conservatively estimated at 300 million.”

“Baiyuan Xincai's stock was valued at 1 billion yuan, and capital shorting of 300 million would be a fatal blow to the stock price. If we could dump 300 million worth of Baiyuan Xincai stock at next Monday's opening, it would definitely trigger market panic and cause the stock price to fall, and that would be the best time for us to close the position.”

“What you had to do was get Zhongwei Construction's 300 million before Monday's opening.”

If he stopped now, Zhuo Hang's cash just happened to be enough to compensate Gu Zheng; but if Zhongwei injected 300 million to short it and Baiyuan Xincai's stock price still went up, what Zhuo Hang would face would be debt, or even prison.

If the crazy bastard just wanted to turn the tables and still could not reach his goal even after giving everything he had, he would use every means to drag others into the water.

Zhuo Hang had no middle option, either he would not do it, or he would do it to the extreme.

If it succeeded, he would go down in history. If it failed, he would be in prison for life.

Gu Zheng asked, “I go negotiate for the money, then what do you do?”

Zhuo Hang said, “The two most commonly used shorting methods are, first, capital shorting, and second, writing a research report to expose negative news about the company. To be safe, while you are negotiating, I will conduct research at Baiyuan Xincai and produce a detailed research report. I will gather as much evidence as possible that the company was poorly managed, publish it together with the major media outlets, and deal a heavy blow to Baiyuan Xincai's stock price.”

Gu Zheng asked quietly, “Baiyuan Xincai has no grudge against us. Is it a bit dishonorable for us to torment it like this?”

Zhuo Hang said, “Business war is like the battlefield. Strategy and resources are the keys to victory. Following the rules will only cost you profits.”

Before personal interests worth tens of millions, morality could only be set aside for the time being.

After thinking for a moment, Gu Zheng promised, “I will definitely get the money.”

Before, Zhuo Hang made money from stock trading by luck, and Gu Zheng negotiated by relying on his family's connections. This time, they both had to rely on real ability.

They were two prisoners who disrupted stock market order and had to face limited gains and unlimited losses, running counter to the majority of stock investors.

In the prisoner's dilemma, if they wanted to break the deadlock, they could only move from betrayal toward loyalty.

At this moment, they shared both honor and disgrace, becoming an inseparable community of shared fate.

Nash equilibrium