The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1905-02-01

to conversion was obvious enough.
The convertible bonds followed the
market for the stock, at a respectable
distance; in that week of 1901 their
price at one time reached 129 But
this high bid was obviously a result
of the urgent demand for Union Pa
cific stock with which to make deliv-
cries in an hour when the word was
troll not only of Northern Pacific stock,
but Union Pacific also, was being
fought for by gigantic financial rivals.
With Union Pacific common arOun d
| 81 in March of 1901. trading in the
convertible bonds fluctuated between
1O3 and 105. In April the common
stock worked to par, and the bonds to
10Y. Since May, 1901, however, the
stock has usually sold a. fraction
higher than the bonds. The reason
for this was that the bond, when is
sued was a ten-year lien against earn
ingS, redeemable by the company at
convertible bonds and the preferred
stock limited to 4 per cent. annually.
speculative interest naturally followed
to the common shares. In an ordinary
market the difference between the
common stock and the bonds repre-
sented the adjustment of the interest
and dividend in conversion A trans
action not unusual in an active mar
ket has been short sale of the stock
and q purchase of the bonds, or vice
versa. As the bonds and stock nat
urally move together. a room trader
with no commission to pay can fire.
quently, in a movement either up or
down, scalp an eighth or a quarter
on hundred shares before the gap be-
tween the bonds and the stock closes.
The purchase of Union Pacific con-
vertibles for the purpose of securing
stock to cover a short sale of the COM
mon has on numerous occasions re-
suited in loss to an outside trader.
The adjustment of the interest and
4 fx~f1 fC of
tors in this transaction.
One Of the most interesting issues of
convertible bonds outstanding is the ST.
$4,000 St Paul Is due July 1, 1905 These
bonds, which are convertible into prefer
red stock, dollar for dollar, are part of
an Sl1,300O0O issue, sold shortly after the
panic of 1873 at So. The dividend on the st.
Paul preferred was reduced from per
cent to in 1883 and AZ in 1889. Since
1896 the annual dividend rate has been at
outstanding convertibies placed a higher
value on the right to convert than on the
stock dividend. The holders of the pre-
ferred and common stock share equally in
any further distribution of profits.
In March of 1902, when the Pennsylvania
holders of the company were offered the
right to subscribe at par to S50.O 1000 312
per cent ten year bonds. The bonds were,
upon written notice given 80 days before
any interest period, convertible into stock
at 20 per so share. IN se1P6tem7ber the
OF 1903, or 80 days after the S13O,OO0OO0 in
crease in capital stock was authorized,
s29 500 of the bonds we're converted. Be
tween the time that the S75,OO0OOO new
stock was subscribed for by shareholders
at S120, and the announcement by the syn
dictate that all unpaid for stock would be
taken, Pennsylvania declined to 1l0s4- The
Pennsylvania directors were given author
ity in 1903 to issue $4,000 600 of the $50
coo increase in capital then authorized in
convertible bonds. The present selling
price of the stock. viewed in the light of
the conversion agreement of 1902. explains
why the directors recently decided to is
sue a long term bond rather than stock
or COnyertibles