MovieChat Forums > Arbitrage (2012) Discussion > One Question about the End

One Question about the End

posted 12 years ago by NelsonVanAlden
29 replies | jump to latest

let me start off by saying I really enjoyed this movie. I thought Richard Gere was fantastic and I can see why there is talk about him possibly being nominated for an Academy Award. I also thought Nate Parker was very moving as well.

My question is about the end. After Richard Gere makes the sale. The buyer and someone who works for him are in the limo going to the party or awards ceremony or whatever it is. The guy who bought the company, his partner said he did some investigation into the companies financials or whatever, and the buyer ends up looking at the numbers and says he thinks the financials look good. I was confused by that.

Does anyone know what scene I am talking about? I thought the buyer would have realized that Richard Gere's company that he sold him was not making money. Maybe I mis read that wrong. Can you guys help me out

[–] apostolos1989 12 years ago

He understand that he got cheated but he says it is ok since he cannot do anything after the deal is closed.

Maybe he can but he would jeopardize the future of the company and eventually he will loss more money.
So he plays along like everything is fine as everyone does in the end (wife, sister & Gere himself)

The same think Gere did before the trade,even a little connection to the car accident for him may not only stop the deal but it may also put an investigation on him and they will find out the fraud he was into.

[–] NelsonVanAlden 12 years ago

That makes sense. Thank you for that. I really enjoyed the movie.

[–] esokullu 12 years ago

To me, the message of that scene was, everyone in this business is playing the same game- arbitrage; so the guy was not surprised to see the improprieties in bookings. He's doing the same with his own business and he's fine as long as he can portray it as a good investment to his own investors- which basically comes down to what his job is.

[–] JeffAtlanta2004 12 years ago

To me, the message of that scene was, everyone in this business is playing the same game- arbitrage;

What does that mean? Arbitrage is not something underhanded or duplicitous.

[–] philsk 12 years ago

Yes I know the scene you are talking about and in the grand scheme of things it makes sense that Mayfield accepts what he has seen.

The reason being that as far as the market is concerned it will have been seen a good purchase, thereby giving his company credibility in a market which was sceptical about his own company's performance; the share price will rise (it had fallen recently) and as Richard Gere had stated earlier on in the film, success is all about perception, and the market would have perceived this acquisition as a success.

Over time and given the way markets work, the shortfall of over $400 million would have been clawed back and everything would be hunky dory!!

I thoroughly enjoyed the movie and watched it twice, with Richard Gere's performance being exceptional.

[–] freitagfan 12 years ago

During the meeting where the sale is finalized, Gere mentions that the buyer's performance has struggled and he NEEDS the purchase for his career. You can't make a purchase announcement like that and then admit you were cheated. You'd be fired within days. Gere knew that. Would have been an interesting conversation at the fund raiser in the last scene though.

[–] haroon87 12 years ago

I understood the situation to be that the 400m was no longer missing because gere plugged it with that loan. The loan would be paid back by gere himself from the 500m he got from the sale. Basically, there wouldnt be a major problem as the investors would be none the wiser. The fact he understood this to be the situation so quickly suggested it was commonplace and he didnt mind, most likely because he was doing similar frauds.

[–] eYeDEF 12 years ago

Gere did not plug it with the loan because it's no longer his company to plug. It's Mayfield's company. He has no way to plug a company that he doesn't own.

[–] imvaughn 11 years ago

Yes Gere did plug it. Let me explain. Say I have 100 million and I lose 50 million. I am left with 50 million. Since no one knows I sell my company for 125 million to you. YOU just plugged the hole. I was basically lying on my books to make it seem like I had the money. When you gave me the money I no longer have to pretend. That's how the hole got plugged. So no one loses money. Gere explained this to his daughter in the park.

[–] eYeDEF 11 years ago

Then using your very own logic Gere did NOT plug it. Mayfield did by buying the company at the overinflated price. Which is what I've been trying to explain all along. You're barking up the wrong tree.

[–] pronger-1 11 years ago

Miller plugged the hole by using the 412 million he borrowed from his friend Jeffrey Greenberg (the guy shown very early in the movie). He then sells his company for 525 Million to Mayfield. He uses 412 Million (plus some interest) of the 525 Million to pay Greenberg back and keeps the rest as his net profit.

[–] gabby_bm 11 years ago

Essentially then, Mayfield has to repay the Greenberg loan as Greenberg's money was sloughing around in the accounts doing nothing but plugging an accounting hole. Mayfield comes in, has to pay Greenberg back the $425 million + interest and Mayfield just bought a company valued at $525 Million with an actual value of $100 million.

But the perception of a $525 million acquisition will likely double the value of his company's shares so it will end up being a wash.

"De gustibus non disputandum est"
#3

[–] 11 years ago

[deleted]

[–] Ace-33 11 years ago

What are you guys all talking about!!! Doesn't anyone understand Economics 101??

Hundreds of millions of dollars were lost in Russia because of a bum deal. That money was kaput! All tied up and not likely to be returned.

So Richard Gere borrow $425 from Greenberg to cover the hole in his balance sheet, except he shows it as an asset, as if the money was actually his with zero liability. He wants to close the sale and show that his company is actually worth $525 million. However, whenever you borrow money to build up your asset, you legally have to show a corresponding liability for any given loan, giving you a net equity of ZERO on the books.

Well the audit never showed the $425 as a loan because it was under the table. However after the sale was made, and Greenberg got his money back after the sale was consummated, guess what! The company that Mayfield thought was worth $525 million which he bought with his own money was actually worth only $100 million. Guess who got con? Mayfield!

Mayfield gave $525 million to Richard Gere (cash presumably) which Richard used to not only pay off the loan but to give himself a nice profit. And what did Mayfield get in return? A company with very little net worth with a reputation that will soon go in the tank the next time the company is audited. The audit will show assets that no longer exists and all the shareholders will go berserk ala the bank failures that our country experienced not too long ago.

When hundreds of millions of dollars go south because of a bad deal, no one profits from this. All the investors get screwed because it's their money that went down to tubes. You can't make a handsome profit from money that no longer exists in the company's ledgers.

[–] TheGreatGunnerB 9 years ago

You have the temerity to ask "Doesn't anyone understand Economics 101??"

And then go on to demonstrate your own lack of understanding of what transpires

You acknowledged that in the company there is a sum of $425 million, which is actually an under-the-table loan, showing as part of the assets
You also acknowledged that the company was sold for $525 million, with said money going to Richard Gere as his very own personal money

So far, so good
Then you say that Richard Gere used some of the $525 million to pay back the under-the-table loan [and give himself a nice profit...]

Oh, but hang on...
You seem to think that, upon repayment of the loan, the company is suddenly worth $425 million less [ie now worth only $100 million]
Which makes you spectacularly wrong; those $425 million never leave the company

Given that Gere REPAID THE LOAN FROM HIS OWN PROCEEDS OF THE SALE, NOT WITH THE COMPANY'S, the under-the-table $425 million remain with the company, and are a genuine part of the assets
Your VERY strange accounting [not Economics, BTW - you obviously don't understand what that word means] would have $425 million going to Greenberg twice over
Nice for him

Perhaps one of your teachers or another adult could talk this through with you to ensure that you fully understand your error
I would suggest that you don't ask your mom as she would be so disappointed at you and also no longer be able to trust you with money to go to the shops for her...

[–] 9 years ago

[deleted]

[–] artistathome 11 years ago

Yes Maayfield got the company and realized the 400 mil in assets was no longer there because as soon as the sale went thru the 412 mil loan was sent back. meaning Miller Capital was not a lucrative as Mayfield thought.

But I totally agree, Mayfield knew something was up and he wanted the company anyway. He was stalling to get Miller to come clean and admit it, and lower the price.

Everyone got what they wanted. Miller gets 525, pays off the loan and has millions left over and his kids have jobs.
Mayfield gets this huge well known company that he can run himself and make tons of money off of.

And what was the reason Mayfield wanted Miller Capital? Prob because his investment company wasn't doing so hot! There is no way he would announce he got snookered by Miller.

Everyone got what they wanted, but I don't think Miller wanted his daughter's hate or a divorce.

[–] mrich77 12 years ago

I thought Mayfield was aware all along that there was a problem. When Gere is arguing with the auditor who had said the audit passed and then changed his mind, the auditor says that the person holding up the release of the audit is Mayfield

[–] eYeDEF 12 years ago

Mayfield was holding up the audit in order to negotiate a better price. Gere even comes to that conclusion and says it out loud in the dialog.

[–] georgegliddy 11 years ago

well sir or m'am... maybe such gere peep was LYIN so how cud u b so sure anyway????

[–] eYeDEF 11 years ago

Because Mayfield didn't deny it at the time.

[–] 11 years ago

[deleted]

[–] laurita_a 12 years ago

I think Mayfield knew the truth all along and that was why he went to Miller to try to acquire in the first place. Remember Miller says at the restaurant that Mayfield came to him. My guess? He has a way to get the copper out of Russia. In the deleted scenes on the DVD, we see Miller's company is being denied an export license. Maybe Mayfield has a way to get a license. Maybe he was behind Russia's denial of Miller Capital's license. I think Mayfield is the one engaging in the true arbitrage of the film.

[–] gabby_bm 11 years ago

Interesting, Laurita_a. That would fit very well within the movie.

"De gustibus non disputandum est"
#3

[–] Ace-33 11 years ago

The buyer got screwed. Pure and simple.

Hundreds of millions of dollars were lost in Russia because of a bum deal that Richard Gere tried to engineer. That money was kaput! All tied up and not likely to be returned.

So Richard Gere borrow $425 from Greenberg to cover the hole in his balance sheet, except he shows it as an asset, as if the money was actually his with zero liability. He wants to close the sale and show that his company is actually worth $525 million. However, whenever you borrow money to build up your asset, you legally have to show a corresponding liability for any given loan, giving you a net equity of ZERO on the books.

Well the audit never showed the $425 as a loan because it was under the table. However after the sale was made, and Greenberg got his money back after the sale was consummated, guess what! The company that Mayfield thought was worth $525 million which he bought with his own money was actually worth only $100 million. Guess who got con? Mayfield!

Mayfield gave $525 million to Richard Gere (cash presumably) which Richard used to not only pay off the loan but to give himself a nice profit. And what did Mayfield get in return? A company with very little net worth with a reputation that will soon go in the tank the next time the company is audited. The audit will show assets that no longer exists and all the shareholders will go berserk ala the bank failures that our country experienced not too long ago.

When hundreds of millions of dollars go south because of a bad deal, no one profits from this. All the investors get screwed because it's their money that went down to tubes. You can't make a handsome profit from money that no longer exists in the company's ledgers.

[–] cubby2432 11 years ago

Robert Miller (Richard Gere) took the $412 million hit.

James Mayfield bought a company worth $525 million. The $412 million loss from the copper mine was covered by the $412 million loan from Jeffrey Greenburg.

The $412 million ultimately came out of Robert Miller's proceeds from the sale. He paid back the loan from Jeffrey Greenburg and was left with $113 million, less what ever interest he paid to Mr. Greenburg.

If the copper mine loss had never happened, then Robert Miller would have ended up with the entire $525 million from the sale.

[–] polsixe 11 years ago

Standard Bank shareholders get screwed, the $400 million in Russia eventually ends up as a bank loss, but relatively small for a big bank. Mayfield keeps his $18 mil a year job as bank CEO. Miller's company actually was a pretty good investment firm so as a subsidiary to Standard would continue to earn profits. Gere's character pays off his friend's $400 and HS leftover to do whatever he wants. It was only Gere's reckless gamble on the Russian copper mine that caused a problem.

[–] Imorosowski (6) 8 years ago

He was short $412M.
He borrowed it.
He sold company for $525M.
He paid his debt back and kept $113M.
He lost it all since he gave everything to his daughter to avoid going to jail.
He had some off shore accounts (confirmed by his wife)

[–] wiiztec (258) 2 years ago

She said "you probably have" the existence of offshore accounts was not confirmed