Ivar Kreuger - Kreuger The Gambler

Kreuger The Gambler

In spite of the large number of bona fide companies Ivar controlled, he was fundamentally a gambler and often a very lucky one.

He speculated with his personal funds and, especially, with the money of the corporations he controlled. The preceding statement should be seen in light of the fact that Kreuger treated most of his companies as if they were exclusively his personal property. He frequently transferred funds from one corporation to another with little or no formality. A number of dummy corporations and holding companies (e.g. Garanta and Continental Investment Corporation) helped him to hide what he was doing. He also used others as front men to conceal his actions, e.g. when he acquired almost half of the outstanding shares of Diamond Match Company so as not to raise anti-trust concerns in the USA. Towards the end, in 1932, when he frantically gambled with the securities of corporations he controlled in the vain attempt to reverse their falling prices he played the markets himself and had friends help him in the effort to prop up share prices. Between the end of February and early March 1932 he needed to make over $10 million (equivalent to more than $150 million in today's money) for payments, including Kreuger & Toll dividends.

His speculations were in foreign currencies, equities and derivatives and he also signed loan agreements with governments not knowing where the funds would be coming from. For example the majority stake he had bought in a chemical company in Griesheim, Germany returned 15 times his investment after two years when the company became part of I. G. Farben. Part of his attraction for investors were the high dividends Kreuger & Toll paid. Therefore he also had to make sure that he had money to pay those dividends.

It has never been established how much Kreuger lost in these frantic efforts in early 1932 but it has been estimated to be between $50 million and $100 million (ca. $750 million and $1.5 billion in today's currency).

His first sovereign loan went to Poland and when Kreuger signed the agreement he had no idea where the funds would come from.

When he made a deal with Germany for a $125million-dollar loan (almost $1.9 billion in today's currency) with the conditions that Germany sign the Young Plan and, of course, award him a match monopoly. (He already controlled 70% of German match production before the loan agreement.) When he signed the contract he had no idea where he would obtain the huge amount, however he was lucky. Prime Minister Aristide Briand of France decided to repay before it was due a previous 75million-dollar loan from Ivar. Incredibly, the French agreed to pay this sum by April 1930, just before Ivar's first payment to Germany was due. That payment gave Ivar enough cash to make his first installment. Either he had negotiated a sweetheart rescue deal with Prime Minister Briand, or he was incredibly lucky. He also made $5 million (ca. $75 million in today's currency) due to the way the loan to France was structured. (It had been discounted and although France received only 70 million dollars it was obligated to pay back 75 million dollars.)