New-York tribune., 1902-07-27
financial.
The Financial World.

Street was awaiting with interest the new
scheme which should make Rock Island a mar
ketable stock at 100 21O. one figure being as
good as the other" The Street has the schema
now, unofficially; in a few days. when the diA
rectors have formally announced it, it will have
it officially 1t is the topic of discussion.
and dominates for the moment all others.
AS announced. it declares itself frankly as a.
scheme whereby speculative purchase of the
Rock Island property can be made profitable To
the purchasers; and such it carries almost
as many chances of collapse as did the famous
Diamond Match speculation. which would have
been carried through the same lines had ID
not come to grief prematurely. II also is
Illuminating in that II throws light the plans
which lay behind the attempt to buy up control
of Northwest. at enormous prices; and suggests
there may be like schemes for other properties.
1t is easy now TO see why certain capitalists
should be Indifferent. seemingly indinerents
whether they paid 40. or 115 or 200 for a stock
a fact which of late has much puzzled the rank
and file-and something higher than the rank
and hle-of Wall Street.
The general plan may be described in brief
as this: having bought up all the share eapitai
of a property. issue collateral trust bonds for its
which sell to the public. This gives back TO the
first purchasers their actual outlay Issue also
a mass of new stock. which also comes to the
owners of the original shares. bonus; and this
which the big profits to be made.
II will he seen that the success or failure Of
the scheme mainly turns on the success or fall
ure TO work off the new bonds on the pubics
If the public will buy these, the men who havd
bought up all the Rock Island stock get theirs
original outlay back, certainly 50 per cent OF
1t; while at the same time they have the new
stock which they received as a bonus. and
which costs them nothing. or possibly 20 cents
on the dollar.
But suppose the public be shy of these coll
lateral trust bonds which the securities OF
new company distinct from the original Rock
Island Railroad Company; different corpora
tion known as the Railway Company. Sup
pose that II be still more shy of the stock of this
railway company. Here is the element OF
danger. II the original purchasers used none
but their money in buying up Rock Island
stock then If the public refused TO buy the bonds
such refusal would simply tie up their money
in them: but If they had to borrow extensively
TO purchase the property. depending upon ths
public taking the bonds TO liquidate the loans.
then It can be seen there could be smash hka
that of the Diamond Match speculatiOn-whlch
went to pieces from precisely this difficulty
So that brought down to the essence. tha
question whether or not the public will take the
new bonds is the question whether the Rock
Island speculation is to be success or a fall
ure-and If the latter. one that viii certainly
give Wall Street bad shaking up.
As attention is universally directed 70 this
company now. there is certain TO be searching,
discussion of its status; and the first thing whicEs
will appear is that the Rock Island property
under its new management is not the cOnserva-
lively managed concern it was. 1t is for ala
practical purposes new concern. branching Oud
in various directions. aiming for the PACING
coast taking IN new lines. and growing in new
mileage to double its old dimensions All this
may turn out successful, and 1t may not Any1
way it is a problem OF the future; and thereS
FORE makes the issues either OF bonds or stocA
OF the new railway company highly specu<
lative.
1t Is comparatively recent history of the Rocj
Island. that when it crossed the Missouri Rivec
and branched out into the country beyond. go<
ing down into Texas and the Indian Territory
the company was heavily burdened by ths
weight of interest the bonds which buil0
these new and for a long time Improbable ex-
tensions, that its old s per cent dividends wera
reduced year by year; until for time it be-
came doubtful whether the road would be abls
to pay as much as per cent OF course ths
stock sold down TO figure corresponding to
this.
Is there any assurance that the second period
OF expansion of the Rock Island Company will
not be a like period of tribulatiOn? No
can TELL be he never smart a financier. II
he could forecast the seasons he might but not
otherwise.
II is. therefore obvious that the securities OF
whatever name nature to be issued by the
Rock Island Railway Company must take their
place in the market securities purely
speculative as those Of a new concern. with the
doubtful future of concerns. Neither is
there any certainty that it's bonds will be sure
of their interest under the new and out spread
ing management of the property. than there
was In the old times that Rock Island stock
would pay the dividends after the road
crossed the Missouri River. as il did before ir
entered that era OF expansion
These considerations come to mind when Ona
sees the market stimulated by the operation
OF schemes which have many elements OF
danger in them; but for the moment the specu-
lative public seems to believe in them. and any
one who should put his doubts into action by
selling short is likely to have bad time The
advance of prices during the week in the stocks
of the western roads, has been marked. Out
side of them. not much has been doing. One OF
the current reports is that an event OF the
future is a closer alliance between the ST. Paul
and Union Pacifc-which Mr.. Hill says would
be a good thing all round, but that he himself
has nothing to do with it. St. Paul stock has
been one of the leaders of the week. making a.
record price. crossing 1S9; but Union Pacific
has been comparatively quiet-it may be said.
quietly strong. The AtchsOns have been in the
front also, with much talk of a final alliances
between this road and Rock Island. and pOssi-
bly, some arrangement will be made between
them in respect to Pacific Coast traffic; but at
present, II is more probable that the people who
are booming both stocks mutually assisting
each other by talk rather than action. The