The daily morning journal and courier., 1897-05-25
ISSUE OF RAILROAD STOCK
HENRYL. GOODWIN \ MEMORABILIA Es
 TIRE LEGISLATURE.

Proposition to Prevent Watering Stock Bil Copy of the Law of Massachusetts Prevents Issue of Capital Stock by Railroad Company Greater Than the Nominal Amount Thus Paid In.
 Following is the text of memorial presented in the house yesterday con- corning a bill now pending which reg ulates the issue of railroad stock:
 To the Senate and House of Represen-
 tatives of the State of Connecticut, in
 General Assembly Convened.
 Your memorialist, Henry l.. GoodWln' of East Hartford, respectfully repre- sents that house bill No. 4S6, entitled, An act relating to the increase or capital stock by a corporation owning or operating a railroad by steam or other power" was introduced at his request and he begs leave to submit the reasons why, in his opinion, the Dill should be passed and become law.
 The bill is copy of a law which has been in force In Massachusetts for sev- eral years, and has proved very satis- factory there. One of it's provisions prohibits the issue of capital stock by railroad company for a greater nom1n- al amount than is paid in to the com- pany issuing the same. There is no provision to that effect in the charters granted to the railroad companies of this state, nor Is there any law prohlb- iting the issue of certificates of stock in excess of the capital actually paid in.
 That this has been done in former at at1xy with impunity. is evident from the hnd- ing of special committee of the house of representatives made in 1878. That committee reported the names of six different railroad companies which had Issued watered capital-the capital so issued aggregating upwards of S4l0O,- 000, and being equal to nearly 33 per cent. of the paid-in capital of those companies, namely, $12,7490Oo This watered capital was also reported to the railroad commissioners as actually paid in,'' and the commissioners ac- cepted the companies reports. An ex- animation of the last annual report of the railroad commissioners leads to the inference that some of the electric rail- road companies are indulging in the same practice quite freely.
 One of the objects of the bill Is to prevent a continuance of this vicious practice. Another object is to prevent the issue of capital stock at price be- low its actual value.
 In 1889 the capital of the New York, New Haven and Hartford Railroad company was assessed for taxation at $250 per share, and it sold in September of that year at $275 per share. At that time its outstanding capital was S15,- 500,000, or 155000 shares of $100 each. Since then it has issued some 140,000 additional shares, receiving therefor only $100 per share. The company has also issued some $16, ,0OO, 900 of debenture certificates in which 1t contracts to de- liver in 1903 in exchange for the de- bentures, 160000 more shares at $100 each
 For the O00o, 900 of cash thus real ized since 1889 the company has issued and contracted to issue 100000 shares; whereas, had the shares been issued at their market value, the company could have realized the same amount of money by the issue of only 100000 shares Had this been done, it would have been necessary for the company to tax the public. in order to pay divi- dends on only $12000, 900 additional capital instead of s3000O,000.
 By the provisions of it's charter the company may, at any time, issue some 36OO00 more shares. The issue of 220- 900 shares at the presnt market price would yield to the company as much money as the issue of 360,0 900 shares at $100 per share, and it would save the bn;, fo J;1,j- dends on an unnecessary issue of $14- ,000 of capital
 It would seem therefore, as though 1t were manifestly for the interest of the public that this bill should be pass ed and become a law.
 If 1t should be claimed that injustice might be done to railroad companies by prohibiting them from issuing capital stock at less than it's market value, it is only necessary to look at the result of the New York, New Haven and Hartford company's issuing stock be- low it's market price. In September, 18S9 it's stock was selling at $275 per share The present market price is $165 per sharea falling off in value of $110 per share, while the shares of the Bos- ton and Albany company have, during the same perlod declined only SS per share, and are now selling for $212 per share. The New York, New Haven and Hartford company has found 1t neces- sary to reduce its rate of dividends 20 per cent, or from BIO per share to S8 per share, while the Boston and Albany continues to pay it's long established rate Of $s per share. Stockholders of the New York; New Haven and Hart ford have lost more by the depreciation of their stock since 1889 than they have gained on the stock issued to them at $100 per share.
 The only objection which your memo rialist remembers as having been made to the bill, at the hearing upon it before the railroad committee, was that it was not broad enough-that it ought to have been drawn so as to include gas com panies, water companies and other quasi-public corporations. He has yet to hear any better reason why a law which has proved so satisfactory in an other state should not be adopted by this state than that given in 1895 by the