The Manitowoc pilot. [volume] (Manitowoc, Wis.) 1859-1932, 1875-02-25
STOCK WATERING.
Lecture by Charles Francis Adams
Jr., Esq. in the Lowell Instf
SuGe Course.
Boston Globe

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The subject of Mr.. Ada ms lecture in the
Lowell Institute Course, last evening was
''Stock Watering" and during the hoar
spent in discussing it, the attention of every
listener was engaged, as the question is one
which has called forth good deal of public
and private comment Of late years. Mr..
Adams, in his introduction, reviewed some
Of the criticisms made by orators ard
editors en- this branch of 6nanciering, and
maintained that there was too much high
strung denunciation and general condem-
nation without clear or definite statement
of facts. lie held that very few people had
a clear and distinct idea Of what stock wat
ering really is, and hence arose so Lluch
misunderstanding and misapplicatien Of
terms. His definition of it was an increase
on paper of evidences of value without any
increase in property. Large corporations,
whose property and dividends are limited
by statute sometimes, in order to evad the
limitation, double the values Of the shares
or certificates, 30 that what would be an
immense profit on the actual Investment be-
comes only q moderate percentage on the
created capital; this is one style Of stock
watering. Another, and one WHICH per-
Tins particularly to railroad corporations,
is the issue by stockholders Of additional
evidences or certificates of value without
any increase in the investment. When rail-
roads are being constructed and soon after
their completion they are not only not prof.
liable to their stockholders. but they are
always calling for money. In all honestly
mansged corporations, this money can only
come from one or two sources: the invest
ment and subscription of new capital, CT
from the turning of .he profits into the
property or capital stock. Now when the
road begins to pay, the question arises,
whether the stockholders are to receive
cash dividends on the original Investment,
or additional certificates of value represent
ing proportinate increase in stock; and, do
shares of stock issued in proportion to the
smount of earnings or profits, not drawn
from the treasury, come under the head Of
stock watering? The lecturer would say
no, for they actually turned over money,
which they had right to draw, to the
Treasurer, and their certificates of addition
al stock ownership were their receipts.
Again, If the stockholders of q corpora
ton earn ten per cent dividends aud draw
only six, are they entitled to evidences of
value representing the remaining four per
cent? Vandsrbilt's celebrated is.ue of stock
would come under this head. The Jom-
pany MAS authorized to declare Q dividend
of ten per cent, but preferring to increase
the facilities and equipment Of the road,
the stockholders invested all above eight
per cent. in property. The history Of the
Of all the roads from New
York to Chicago, . distance Of 9S2 miles,
add the increase of the stock of the new
Company BY the transaction was then given,
ssd the statement made that 81 ,OoO, 9g0 of
capital was unexplained. The lecturer
closed by defending the operations Of rail
road eompan es from unjust and uumerited
criticism, and showing that there were two
ades 70 the discussion. The people are
sftea heard TO Complain that they are pay
ing Interest on vast amounts Of watcred
etsck; but it should be remembered that in
Massachusetts, there are l7S0 miles sf roaa
with equipments valued at $1,000 to the
mae, and representing Sill, 900, 900 secur-
ity, On which the people Gay an average
saasal iatersst of s 3-lo Ter cent and this
is en- the original cost instead Of the pres
ent value