The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1905-05-02
RAILROADS
FLOATING NEWSECURITIES
PROCESS OF UNDERWRITING
BONDS OF A RAILWAY ENTER
PRISE ILLUSTRATED BY WEST
ERIN PACIFIC.

The initial step in any new railroad
enterprise, and one Of the highest I'M
portance, is the fotation of its securl-
ties. The bonds issued by such COM
pany are not as rule sold outright, but
put thru an underwriting process.
Pacific Railway company, an example OF
a large railroad undertaking not ire
quently seen even in these times or
great railroad development. This COM
pany, an outgrowth of the Gould-Rocke-
Teller interests, was organized In 1903.
Since then a favorable time has been
awaited for the fotation Of such an en-
terprise. The company was capitalized
for $50,ooo,o0o, and it is proposed to
proximately 1000 mile. For the
purpose of effecting this large loan,
syndicate of underwriting managers was
formed, composed of three of the
wealthiest and most powerful banking
houses in the country, each with its own
clientele Of underwriters.
The syndicate managers consisted OF
Blair & Co., William A. Read & Co,
successor to Vermilye & Co., and Will
lam Solomon & Co. The property and
proposed organization is understood to
be thoroly examined and approved of by
these fnanciers of high standing, and
the bonds put into the hands Of invest
ors eventually thru their efforts Every
underwriting barking house, besides
| large resources of its own, has Its
strength primarily in its accumulated
clientele of bond underwriters of great
| financial responsibility, whose ags-e-
gated signatures to an underwriting, in
sure the flotation of an enterprise of
any proportion without one copper hav-
| ing been paid in toward actual bonds.
There is but one company in Minneapo-
| lis which is known to have share of
this underwriting.
| This syndicate of three great banking
houses offered to its underwriting Glen
tele, both here and abroad, the oppor-
tunity of subscribing to the $50, 100000.
Western Pacific Railway company
bonds, and SO we'll is the projected rail-
road thought of that almost Immediate
| ly the entire amount was oversub-
scribed.
This underwriting does not necessari-
ly mean the purchase by the subscribers
Of any actual bonds; only guarantee
that if market is not found for the
bonds the underwriters stand ready to
take them at named price. In fact
in the case of the Western Pacific
bonds, in order for the underwriting
subscribers to secure actual possession
Of the bonds for sale at the time of
their distribution, percentage is added
to the underwriting cost, at which figure
the underwriters may secure their allot-
ment for their own purposes. The
bonds are brought out, that is sold to
bond dealers, at a slightly advanced
figure over the underwriting subscrip-
tion amount and by them sold to invest
ors. Another method is offering by
Subscription to bond dealers and the
Ipublic, after the underwriting has been
accom- lished, and then in turn the
bonds are sold the public by solicitation
and advertising Of the regular dealers.
In this way corporation makes great
popular loan almost instantly thru a
few men Who guarantee the success of
an enterprise from their knowledge of
what the people will take as an invest
lment.