Evening star. [volume] (Washington, D.C.) 1854-1972, 1905-08-13
TAPE TELLS THE STORY.
Leaking Of Information From officials
Permits Ticker to Discount Dividends

Z GA ILL 41ChCI 10 AlSCOuuL OlV1USuuS.
From the Wall Street Journal.
The Wall street proverb to the effect that
''the tape tells the story is susceptible OF
two explanations. One Of these is cred
liable to directors and the other is not
Let us suppose case. The stock of
corporation rises in the market with con-
tinuou3 and persistent rumors that the
dividends is to be raised. say from a four
per cent to O. five per cent basis. The
street. as a result of utterances more or
less carefully guarded by directors other
people in a position to know. expects the
advance to a five per cent basis. and when
the dividend Is actually made the stock
ceases to go up, or perhaps sells of
little. The tape has told the story" of
the dividend In advance. and in the current
phrase of Wall street the rise Of the stock
has discounted the dividend. The street
has relied upon the semi-official utterances
or opinions Of individual directors which
have been verified by the facts. In this
case directors have given expression to
opinions as to what would be and what Is
likely to be done, and the facts have borne
them out This Is fully as far as they could
go In advance Of the actual declaration of
the dividend by the board. Union Pacific
stock Is fair example Of a case of this
Kind. For many weeks previous to the
common 1t was thoroughly understood that
the prevailing opinion in the board favored
the five per cent rates. The stock advanced
from about 115 to over 40 on that expecta-
ton. The directors unQueStionably did
their best to inform the street on the SUBJ
ject.
Suppose another case however A stock
is not the dividend list at ALL In a
comparatively short time 1t advances
quite sharply on buying orders apparent
ly coming from banking interests more
or less in control of the company. 1t is
impossible to get any statement from
them anybody else, semi officially or
otherwise, as to the action that will be
taken with respect to dividend Finally
the dividend IS made-a higher dividend
than had even been rumored. The stock
fails to go up any further and the specu-
lation in 1t largely ceases. 1t Is evident
that here also the dividend has been dis
counted. but the discounting has been
done by comparatively few people. obvi-
ously acting definite information,
which information was carefully conceal
ed from the street and the public. Here
the tape" has told the story" and the
tape alone has told 1t. The dividend has
truly been discounted, but discounted by
inside" interests acting for their own
profit. Wall street Is full of such cases,
and 1t IS hardly necessary to exemplify.
In a case like this where a company's
directors have specialized for their own
profit or the profit of their immediate
friends on advance knowledge Of what
they were going to do with the dividend
there Is to be noted a distinct breach Of
trust-possibly not legal breach Of
trust, but assuredly a moral one. 1t Is to
the latter case that the street usually re-
fers when 1t recalls the proverb
1t will be argued that directors are placed
In somewhat of hard position in the mat
ter OF giving information to stockholders in
advance with respect to dividends to be de-
clared in the future. Plans may always be
upset or changed by unforeseen contin-
gencieS and there Is always danger In mis-
leading the public by premature announce
ment of intentions. That Is absolutely true.
But that fact certainly does not warrant
the exploitation by directors and their
friends Of such advance knowledge as they
may have in the stock market at the ex-
pense Of their own stockholders and the
public. A banking house controlling the
dividend policy OF railroad and having
representatives upon the board of that rail-
road has no moral right to use for it's own
private profit and the profits of its imme-
date friends the information and the power
attaching to such control and such repre-
sentation. The power and the knowledge at
the disposal of directors of corporation
are not the property of those directors as
individuals to do with as they please. They
constitute trust to be used for the benef1t
of all stockholders alike. Majority owner
ship even will not help the matter, for even
IL a director personally owns majority OF
the stock of corporation, he has no more
In the stock than he would II his holding
was barely enough to quality him. Trite as
this argument Is, 1t would seem as If 1t
needed frequent repetition even in these
days There Is still great deal too much
of abuse Of power and position by directors
of corpora lonesome OF them stanolns
high in the community.