The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1899-11-21
Some Facts That Buyers Of Stock
Should Always Ascertain.
PROBLEMS or CAPITALIZATION,
ExDIanation of MoAern MefhoA Of
uenf Of Mtnsng Property-Stngu-
Lar Experience Of the Moliie Glib
the stock Cuts Very Little Figure.

II is an exceedingly difficult matter to
foreteaI just what any mining stock will
be worth with development. Ninety
nine companies out OF a hundred which
are organized own property IN the stage
OF Development. While a great many of
them have little merit, good percentage
Of them prove TO be large mines And
yet II they were capitalized on basis OF
the actual selling value AZ the time the
company was organized II would often
mean capitalization of not more than
l2S.Do9 to $1,000 Probably OF the really
good showing prospective properties pn.
on the market tho cash cost TO the com.
pany will not average To eeceed So 0Q3.
Now. If a company should capitalize at
5000 and IL takes $500 10 open the
properties up. which amount In oftcner
used than the investing public realizes.
then the capitalization would have TO be
tIGa. go 900 to pay for the properties
and ts0.00 for development, work. and
yet the stock might pay more than par
per share in dividends each year after
the property was opened up and the
stock be readily worth ten-feid the par
value,
How the MoIife Gibbons Paid.
There have been numerous instances In
Colorado and Utah where companies
have been organized M from So, 80 Ia
3i,0a1.oe0. and the stock has gene up 10 a
selling value OF from $56o0.oa to SIS. CO.,
0oo When the compa nies were organized
the chances are that many people thought
the capitalization was high For exam.
pie. when the Moilie Gibbons was capital
lied at 81 10000 the capitalization was
considered 50 high that the stock would
not sell on the Denver marker at IL cents
per share. the price asked for IL through
the public press. and yet that stock paid
10 cents share per month In dividends
after they got their property opened up.
Taking 1T all IN all. II IL exceedingly diff
cult 10 say what would be fair capi,ai~
ixation for any mining company. The
custom OF late years has been 10 capital
fxe at anywhere from one TO two million
dollars In 81 shares, and then To put, say.
from Is TO SO per cent. OF the stock In the
treasury OF the company for the purpose
OF raising moneF 20 develop tho prop
critics.
Custom of Conservative Concerns,
The amount set aside IL presumed 10 be
based on the needs Of tire company for
funds for development purposes, and IL
also presumed To take into consideration
the actual cost OF the property TO the pro-
meters IN rcatior 10 the amount Of eapl~
tai needed for development. The custom
with the more conservative concerns is 10
organize at from one 10 two million dol
lars. place a certain portion OF their stock
In the treasury. have engineers make an
estimate of what II will cost to open their
property up and set price on their stock
that when II Is sold IL viii cover that
cost. and also leave a margis for ome.-
gencies. In some eassS the estimate Of the
amoun, required may have been too
small. say s15.ofo or Sc, oeo. and the stock
put on the market at proportional. ra-
tho. In ether cases IL may take from
$ioo. coo to & go Ia develop the properties
and eq.io them with the necessary ma
chinery ami reduction works. and the
stock would be proportionateiy higher,
the higher priced stock heins probably
the cheapest In the long run. as II prob
ably represented much better property.
The question of capitalization does not
cur much figure. The main question for
the invcstcr IS rs ia whether the stock
would be a good buy ~ the price asked:
whether II ia n good buy AT cents. 10
cents ~ cents, or whatever price Is asked
for II.
what Buyer should Find out.
The price asked cuts very little figure.
II II be "a dollar a share and lo8 shares
wifi pay $50 per year Ia dividends. then
the stock is a good buy at dollar per
share. 10 1, takes I.oo shares Ia earn So
per year In dividends. then the stock is
coed buy at 10 cents per share The first
thing for a buyer 10 find our Is whether
the property which is represented hy the
stock has intrinsic value back 81 II.
whether she property Itself Is worth the
amount Of money represented by the sell
snE price ~ the stock. Next. whether 81
IA In tie hands os practical mining snen
Of Integrity. men who kncw how 20 open
the property up and how ~ work Il "a the
best advantage when q 81 opsned With
those two conditions al right the chances
are shs third condition 90 whether the
stock was too high or not. would he w
ply covered. And .t would be Of vary hi
tie consequence IN thu heyer whether the
company - capitalized ~ SEE ae or s.. otsa
sen he wauid have 90 invest tire same
amount OF money 10 secure tie same
amount OF returns.