The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1898-08-26
WATERED STOCK.

The increasing or watering OF the
stock OF our corporations is the nat
ural outgrowth of our present condi-
tons 1t is done in all of the great
commercial centers, without hesita-
ton, so long as no law is violated. 1t
is based on the accepted business prop
osition that one has the right to work
a thing for all it is worth" providing
always that no municipal law is VIC
lated
The right to increase stock without
cash behind it, or the watering of
stock, as regulated by our own munic-
ipal law, is not now discussed.
What, however, is the moral right to
increase or water" stock? Just now
it becomes an interesting question.
The watering of the stock of quasi
public corporations, such as railway
and telegraph companies is an entire
ly different matter. Such companies
having received valuable assets from
the public, are bound to look to the
public interests. Other, and the indus
LIld1 NOl DOl db1OuSf OfFC bAlHJ pNOAAS
nothing but honesty. But, usually, it
is as easy for a camel to go through
the eye of a needle as it is for a cor
poration to tell all the truth. The
danger in dealing with corporate stocks
is, not in what is said, but what is
not said, or is concealed. There is no
objection on moral grounds to the is
suing of $1O,0OO,OOO of unpaid capital
stock, provided always the truth is
stated A man has the moral right
to issue a certificate valuing his herd
of one hundred goats at $1,000, 900, pro-
vided there is no misrepresentation or
deception.
AS a rule, the increase or watering
of stock, when done in accordance with
law, has the aspect of a psychological
illusion. Leonard Jerome Lady Ran
dolph Churchill's father) a great stock
operator, said: Issue 10000 shares
of stock at 500 par. per share, and it
makes a capital of $1000,0 00 The
price looks high and there are few buy
ers. But issue 100000 of shares at
S1OO of par value, and the boys will
jump at it, and call it cheap at $1.5O
or 81. 500, 600 for the entire issue" 1t
is the principle that the department
stores adopt of selling a pair of shoes
at 80 cents instead of $1.00. Think
ing men are scarce in the financial
world" Secretary Sherman said, when
the presidents of the New York banks
refused to take a government loan If
teen years ago, and lost several mil
lions by il. The illusions of figures
are attractive, and investors are apt
to deceive themselves with them. 1t Is
no fault of the promoter or the cor
poration that uses water" providing
there is no misstatement about it, and
the law is obeyed. When Jay Gould
issued a S10,0OO,OOO first mortgage on
a railway property that cost him only
$4,000, 900 he did not necessarily com
NIT legal or moral fraud. His Of
Tense was that he publicly misrepre
scented values, and the stupid public
believed him, although they knew his
veracity was always in question.
The serious criticism, on mora
grounds, upon the open increase o.
watering of stock is the constan
danger of misleading the very largt
class of Woodworking, saving people
who have neither opportunity nor time
to study the complicated subject Of in
vestments These, including the wild
ows and the orphans, follow tn
crowd" and it is the terrible and sal
experience of all financial centers, tina
in boom periods, they get left
But so long as those who do the wat
ering'' avoid any legal complications
and tell no lies, there seems, unde
the present business morals of tn
world, no reason why they should fur
nish brains and experience to the sim
ple, the ignorant and to those wh'
dabble in things they know nothing
about.
There are risks in all kinds Of bust
nesses. There is always the danger tina
the inexperienced, the ignorant, tn
industrious poor man may misunder
stand the nature and scope of the cor
rect values of any kind of stocks
whether original or watered, and vii
rush on board" just as the capitals
and the experienced men are stepping
ashore"