The sun. [volume] (New York [N.Y.]) 1833-1916, 1898-09-05
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nOunComenJ U bub DhymShh III NNNohNN W NhS
Government, Of the S5.s00.000 Of interest on
the public debt due Oct. 1. The only force act-
ing In a contrary direction has been the reduce
Cion OF tho bank reserves. inspiring fears OF q
coming strlnEency In the money market. but
these fears soon proved ~groundless. and the
rates OF interest are now little, II at all. higher
than they have been all along. Nevertheless,
business on the Stock Exchange. during tho
past week. has boon dull. and prices have re-
osded. showing that sentiment moro than cold
facts governs the conduct OF operators. They
have got over their buying impulse, and are
willing to sell. II they can do 90 without loss,
In tho prevailing scarcity. even at high
prices, OF frst-class securities. many investors
have doubtless boon tempted to buy the stocks
OF Industrial companies, and moro will proba>
bly, follow their example. The common stocks
OF such companies arc large In amount and
promise large dividends. so that the preferred
Stocks ahead OF them have an appearance OF
value we'll calculated TO insplre confidence. A
oonoorn which Processes to be earning money
enough for both It's common and It's preferred
capital Ii. naturally. assumed to be able. even
in adverse years, to maintain payment on the
preferred, or, where the preferred dividends
are cumulative. to make up In succeeding good
seasons for the deficiencies Of bad ones. The
assumption is not, however. always as well
founded as It seems to be.
Tho s~o-called preference stocks Of most in
dustrlal corporations usually represent. mott
part, but, including the bonds ahead OF them.
tho whole. Of the actual capital invested. the
common stocks having been issued for imaRi-
nary or estimated good will and earning ca
pacity. This Is the reason why dividends are 30
often paid on preferred stocks alone, to tho ,ex-
olusion OF the common stocks. It is only in
exceptionally favorable times that the COM
panies earn enough for dividends on both. so
that the preferred stocks really take the risk Of
o failur Of profits. while the common reap the
benefit OF any unusual success. There is also.
as Q recent example shows, a danger that. In
case OF a long-continuod failure to earn divi-
dends for common stock. the rights OF the
owners Of the preferred may be invaded.
When the General Electric Company. for ex-
ample. was launched. In 1902. a statement Of
its condition was put forth by its promoters,
showing assets sufficient to more than cover
$34.000.0 900 OF capital. which was divided into
about $780, 900. 900 OF common stock and $4,000
600 OF preferred. The preferred stock was en-
titled. by the terms of its issue, to cumulative
dividends at the rate OF z per cent. per annum.
and received such q dividend for the first year.
the common stock receiving 8 per cent. The
preferred stock commanded during this period
more than par. and little OF it was in the market.
while the common sold very nearly up to 120.
When the crash Of 1893 came the company was
with difficulty saved from bankruptcy and q
receivership, and it has not yet been able to re-
sumo the payment OF dividends. Consequently,
Il owes its preferred stockholders five years OF
arrears at z per cent.
It would naturally be supposed. under these
conditions. that the preferred stockholders OF
the General Electric Company had suffered dis
appointment enough, and that they might rea-
sonably expect to receive the arrears due them
n a aA4p n "a fhn nrn,fnp hal fha Fnnnnv fN INV
them. AS a matter OF fact. there Is money
enough for the purpose in the treasury. and
more Is constantly coming in. but the common
stockholders, in pursuance OF a scheme for de-
featinR the claims of the preferred. now declare
that the representations OF 1892 were false:
that the assets OF the company did not
justify the issue of $34, 0O0.OO0 Of stock.
and that, therefore. no dividends can law
fully be paid. even upon the preferred
stock. until the capital has been reduced to
conform to the actual value OF the eompany's
assets. Accordingly. at n meeting recently held
a majority Of them voted to make the reduction.
not only of their common stock. but Of the pre-
ferred likewise. That is to say. they proposed
that, instead of Z per cent. upon 500 per share.
the preferred stockholders shall henceforth be
entitled to z per cent. upon only $50 per share.
or IL per cent. instead OF the Z per cent orig
inally promised them. Naturally. many OF the
pT6I6TT6u SuOCkHOlutTS oDyBcI " Ills Spollhtioh'
and are resisting it in the courts.
The disquietlng feature of the matter is that
the stockholders OF the General Electric Com
pany who are pushing this reduction of the
preferred stock dividends. and are in the MAJOR
ity, threaten the minority who resist them not
only with a continued delay in the payment of
the dividends to which they are entitled. but
with a partial confscation of their stock in
another manner. The assets OF the company
being. as they contend. equal to but q little
over 90 per cent. OF the present capital. they
say that the company is virtually insolvent
and can be thrown into the hands Of a receiver
and wound up. In that event the preferred
stockholders would be entitled to no larger a
share OF the final distribution than the COM
mon, so that they would be worse off than II
they accepted peaceably the reduction now
offered them.
An outrage of a similar character Is also short
1yto be attempted upon the minority stockhold-
ors Of the New York and Harlem Railroad Com
pany. A mortgage OF SIP. 100000 at z per
cent. upon the property OF this company. which
is leased to the New York Central Railroad
Company. will fall due May 1. 1900. and. by the
terms Of the lease. II the Harlem then pays of
the mortgage the Central is thereafter to pay
20 It the z per cent. interest on the whole
$4,000. 900. The Harlem. a year ago. made
arrangements to secure the benefit of this
stipulation by creating a new mortgage roI
S12,OO0.00 o at 81 per cent. and paying of the
present one. thus Increasing its income 3K pei
cent. on $12.000.0 600. or $42o.000a year. The
Central thereupon commenced an action in the
Supreme Court to prevent the making Of
the new mortgage. except upon condition
that the entire saving OF 3h per cent
per annum on the S12.0Oo.0 900 should inure tc
it's benefit. The alleged grounds OF the action
are the flmaiest imaginable. but 1t Is made the
~pretence for submitting to the stockholders o.
the Harlem on Oct. s next a so-called compro
mise by which the Central will get a little more
than half the saving. or 100000 a year. ant
the Harlem less than half. or only $4,000
year. As In the case OF the General Electric
Company. so In this. a majority OF the stock
holders of the Harlem are In favor Of despoilinI