The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1900-01-01
SELLING TRUST STOCKS.
Methods Of Men Who Promote and Or
ganixe Combinations.

From an Address by Hon. Charles 3. Fair
child.
Passing over the preliminary steps neces-
sary to the formation Of trusts, we come to
the underwriting or agreement to buy the
stock. Underwriting syndicates have prob
ably been employed to make sure that
sufficient amount of securities shall be sold
to secure the cash needed, and there have
been one or more bankers who may have
loaned money needed. pending the final
launching of the new company, and may
also have been employed to offer its securi-
ties for subscription by the public. Syndi-
Gates and bankers must be paid their COM
missions out of the surplus securities.
Perhaps a concrete illustration may help
toward a clearer understanding of just how
this part OF the financiering of these COM
binations is managed. Let US assume that
the promoter has secured options upon the
plants, assets and good will of ten manu-
featuring concerns, for which he is to pay,
under the terms Of his options. $S.000,0O0 In
cash and $1,000. 900 in preferred stock and
"a. 000. 900 In common stock Of a new COM
pany Of $20,0OO,0O0 capital (half preferred
stock, to be formed to acquire the entire
plants, stock and other assets, good will,
etc, Of the ten concerns specified, and to
have, when formed, at least $l000,000 OF
working capital.
AS soon as these options are in definite
shape the promoter goes TO some financial
house or firm of private bankers for as
sistance In raising the 100000 of cash
which the plan requires. He presents the
facts as to his options and his programme
and proposes that, If they will arrange a
syndicate to underwrite or guarantee the
purchase Of $4,000, 900 of preferred stock and
"a. 10000 OF common stock for 100000 in
cash, he will give them commission Of
5000 shares of the company.
The bankers give the entire project care
| full investigation. usually employing ex-
perts and accountants to report upon the
facts as to the business and the profits OF
the constituent companies. If the result is
satisfactory the promoter gets a favorable
answer and the bankers become the man
ayers of an underwriting syndicate.
| In carrying out this part of the pro-
gramme they proceeded to lay the matter
before the individuals companies TO
whom they desire to offer an interest in the
| marketing of the stock. This Is naturally
done by submitting copies of a syndicate
agreement, reciting that the subscribers
| agree 10 purchase at par the number of
| shares of preferred stock set opposite their
| respective names. receiving as bonus an
| equal amount OF common stock-but the
| whole conditioned upon there being an
| aggregate subscription equal TO the 81.
/ 10000 to be raised IL the amount is over
| subscribed some subscriptions are either
| thrown out or cut down. II Ii is not sub
scribed the project has TO be abandoned or
| modlefid. In some cases the desired end is
| sought by public announcement OF the
| terms on which subscriptions Will be re-
/ ceived.
| IL the entire s4.oooooo is subscribed the
| next step is To require the payment OF the
| subscriptions allotted. This gives the syn
| dictate managers the $4.000.OO0 cash which
/ the plan requires. The company is
| then Incorporated with an authorized capt.
| tai OF SO. 900. 900 preferred and SlQO00.0o0
/ common stock. which perhaps 5000
e The eennen stock = paAa W IS onsA