The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1866-06-25


lieu enani had induced an oil brother othcer
who could write baronet after his name to
become one Of the directors, the scotch com
mission agent" had got the consent oil telloW-
countryman, who had once belonged to q
respectable Glasgow firm, to do the same, and
the msovent attorney had MANAGED to swell the
list by so.caled captain belonging to q good
club, the battle was more than half won. 1t is
true that each and every one of these directors"
had not only received written guarantees from
tine ''promoers" that they would not be held
liable for any of the preliminary expenses of
starting the company, but were also to be paid,
or piomised large sums in paid.up shares of the
ConoerL before they would consent that their
names should be published in the direction Of
the undertaking. Thus fraud was, from the
very outset perpetrated upon the intending
shareholders Of the concern. When MIR. A, b,
or c, OF the outside world applied for shares IN
o new company, he did so on the faith that
some persons, whose names he saw on the
direction, had really bona ttde stake in the
companys undertaking, instead of which they
had not only risked nothing whatever, but had
really beer paid Tor patronizlng that By which
they could lose little or nothing. What was
this but The obtaining money under false pre-
lenses? The finance company of which we write
was not more dishonest IN this respect than its
neighbors. We believe, # the true history OF
the most "respectaole' OF the finance companies
could be made public, II would be found that
the instances IN which directors had duly quail
fed themselves Tor their posts by subscribing
and really paying Tor certain number OF shares
IN hard casn we're few indeed In the concern
in question there were, when the direction was
comp Cleted, eleven gentlemen who had accepted
seats at the board. They were each obliged, by
the articles OF association, to hold at least dtty
shares, but OF the eleven not one had paid for
single hare and OF the great majority it might
have been said with truth. their means were
means of payment being investgated-much
more ''limitedn than the liabilities OF the share
holders.
Still, it win be argued, there must be certain
considerable expenses III the bringing out ne W
company, which have to be met with cash, and
how could this be done by men utterly penni-
less? To the brave all things are possible, more
particularly in London. In the case OF which
we write, temporary offices were bired, and what
little furniture was necessary procured on the
chance OF being paid TO: at some future day, or
given back should the concern not float" The
most serious expense was the advertising. The
prospectus OF new joint-stock companies are
nect ssarily long. We have before us the pros
pectus OF the finance company of which we
write, and 1t takes up very nearly a column of
the Times. The expense OF each such advertise.
ment cannot be less than twenty or twenty-five
pounds. And when that has to be inserted for
fortnight IN all the list OF daily, to say nothing
of the weekly and provincial papers, the sum
required must be something considerable.
Then newspapers do not give credit. To ad
vertise is to pay down hard cash, and mo
money, no advertisement" is a standing rule at
all the newspaper offices in London.
But even in this matter the wind is tempered
to the shorn lamb; in London, there are such
persons as advertising agents." whose business
1t is to act as sort OF middle men between the
public who want to advertise and the newspapers
that want advertisements receiving small
commission from the former. In ordinary times
and circumstances these persons merely act in
the ordinary way OF their calling But in the
days OF which we write, there were some of them
who a0ded to tneIr business q speculative trade
which they generally found pretty profitable.
They undertook TO advertise embryo compan es
in the public papers, and to pay all expenses of
such advertisements on the following very
simple conditions If the undertaking iourished
ii the public came forward, took shares, and
the directors we're ab to proceed to an allot-
ment" OF the same-the advertising agent was
to receive, in consequence OF the risk he had
run, double the amount-cent per cent.-of his
bill, no matter how much the total might be.
The risk he ran was, that the company, in pro-
moter's slang, "dId not foat.n 1t this hap
pened all that the advertising agent had
laid out was lost. Thus 1t was that
those who brought out the company of
which we write found means to make the
golden hopes which their undertaking held
out known to the public. Here, too, as in
many hundreds OF instances, it may be noted
that the frauds upon the shareholders, com
menced from the very first. For every pound
that had been really expended in the expenses
OF advertising, the unfortunate shareholders had
to pay forty shlllings when they took possession
of their property. In some few inStances-but
rarely-the directors had the courage to insist
that the advertising expenses should be paid
by the promoters out of the promotion money.
This was, however, exceptional, and In most
cases the double expense had to be borne by
those who were not parties to the bargain, and
were ignorant that the charge had ever been
made or PAID
To follow out step by step the history of a
Joint stock company, through every stage, is
not necessary for our purpose; so long as the
race for this kind OF investment lasted, the
history of these undertakings has been very
much the same.
oIp in
yariably those investments of which the public
understood least that were most sought after,
namely, the shares of the finance companies;
and this brings us back to our original question
as to what the operations OF q finance company
really were, and how 1T was that during Their
palmy days they were able to announce such
large dividends.
Let us imagine THE Universal Finance and
Comprehensive Credit Company Limited, fairly
launched The promoters, or nurses, are dis
as amongst the directors there are four or hve
gentlemen-say One-third OF their number-ot
fair standing, and against whose commercial
character nothing is known, the undertaking
may now loo6 out for business. The ca pital OF
the company is one million, divided into 50, 600
shares OF f20 each. But when we come to read
a little lower down in the prospectus, we find
that Only 'one-half of these shares are to be is
sued Tor the present. Here, then, at one blow,
is the real capital reduced from fl,000,0OO to
$500, 900. little further on and we find that it
is only intended to call up, for the present" f5
per share, so that the actual bona tide paid.up
capital OF the company will not amount 20 more
than fl25 600, that is 900 shares with 60 paid
up-minus of course the balances due by those
who cannot pay their calls, and of the directors
shares, upon which nothing whatever has been
paid. Stll there is the nominal paid up capital
of Go per share, and on this we fnd-or we did
find before the bubble buIst-fnance companies
paying dividends OF one, two, three, or four
pounds per share, or at the rate of 90 80, 40 OF
| 90 per cent. per annum; nay, it we are not mis-
taken. there was an undertaking of this kind