The Washington herald., 1907-05-10
WALL STREET NOTES
Union Pacific Report Causes
Shock TO Traders.
NOT MELONS; ONLY LEMONS

nHEEtmuM Issue WE0NS WNESS AAS
More 1t Is ReveaIed-Hurry in
Making Southern Pacific Earnings
Public Not ExpIained-HiIl in West.
New York, May 9-The anticipated
Hartman melons proved TO be lemons,
and of poor quality at that. Even the
most cheerful bull could hardly keep his
courage up when the fact became known
Business had not been under way for
more than half an hour when the rumor
began TO circulate that the directors of
Union Pacific would, at noon, announce
that the much-talked-of plan of financing
had been arranged and that the details
would prove bullish on the stock. Not
long after every trader was committed 10
the bull side ia the belief that the sum
of the roads needs was S60,01.000, and
that this amount would be raised by an
issue Of 5 per cent bonds. convertible
into stock at 14O or $50.
The right 10 subscribe was expected
TO be valuable, the popular anticipation
being that the bonds would go like hot
cakes" But seldom has anticipation been
more completely out of ioint than it
proved TO be tn this instance. When the
official announcement was made at
o'clock il was found that instead Of
needing only S60,0o0,000 the road required
S75, 000, zoo. and that the interest rate on
the new bonds would be only per
cent, which, Of course. would not suffice
to make them go at all if it was not for
q, -. y9oI
90 instead of par.
But there was stil greater disappoint-
ment in the fact that the basis Of con-
verubiity was fixed at 175, instead OF $50,
so that the speculative value of this fea-
turc was reduced 70 very small proper
tons, indeed. The whole plan was so
amazingly out of line with the expecta-
tons regarding it that some Of the trad
ers could hardly believe the announce
ment until they saw the effect on the
market. AS soon as the truth was es-
there was furnished a fitting
counterpart 10 the rush TO get in that
followed the announcement Of the divi-
dend increase last summer.
After the street had heard about the
bonds IL seemed TO make up its
mind that the worst was known regarding
Union Pacidc's financial condition. But
the worst was yet 10 come. This was
made plain when II was found that no
provision was made in the bond issue FOR
the maturity Of the notes given 70 Penn
sylvanla in payment for the Baltimore
and Ohio stock purchased from that com
pany last year, and that stockholders
would be asked to authorize an issue Of
$40, coo 000 additional common stock, OF
which Si000O.000 would suffice for the con-
version of the new bonds, leaving $50.
100 900 in the treasury TO be used at the
discretion of the directors. There is now
in the treasury Sl00000000 pre-
ferred stock authorized a couple OF years
ago. so that the amount Of new capital
lZatiOn at the disposal Of the directors
VIII be about Sl60 000.0 900 after consent 20 /
the increase had been secured.
Not many months ago bullishness on /
the market was fed by reports concerning |
the enormous cash holdings Of Union I
Pacific. Now it would seem as If the /
roads need for money Is almost unilmIt- |
ed. The changed aspect of the roads 4
affairs has dispelled whatever little hope |
Of a revival Of commission business might /
have been entertained by the brokerage /
houses. There are now most gloomy fore /
bodings of the effect Of yesterdays an |
on the speculative temper, /
not to speak Of the investment situation, 1
both at home and abroad.
Last year the earnings Of Southern Pa /
cifc were withheld for about six months. 1
This year an estimate of them Is publish I
Cd several months in advance. Wall /
street, which a year ago wondered why /
the delay. now wonders why the haste. /
The results when published last August /
surprised by their favorable character !
those estimated now surprise by falling I.
far short of popular expectations. Even 4
including the March returns. wEch were !
affected by the foods in California, the 1
net earnings for the nine months of the 4
current year as shown in the monthly !
statements were greater than those Of |
the corresponding period last year by /
more than S60o)0o0. and based thereon /
estimates were made of a dividend sur
plus equal to about Il per cent on the
common stock Now the official estimated /
figures for the full year indicate only
about II per cent, allowing for practically 1
no Increase in net for the next three
months. No one seemed TO he able to rec
1ncile the actual results for nine months
with the estimates for the year.
The denia by an unnamed director Of
Chicago and Northwestern Of the alleged
Intention to Increase the dividends on
both classes OF stock at the meeting next
month, only served to stimulate interest
n the subject and make what had been
before a vague and indefinite rumor take
/ most tangible shape.
According to the latest rumor the Ames
state. the Vanderbilt interest, and Henry
=. Frick favor a more liberal dividend
policy. while the opposition is led by
he president Of the road. who has a
strong supporter in David P. Kimbali.
If course, If this story be correct it is
evident that the party In favor of in
ereasing TIE rate is numerically and
financially far stronger than the Opposi-
ion.
While the stock OF the Boston and
Maine Railroad is not dealt in on the
New York Stock Exchange. its rise has
excited considerable interest
md rumor has been busy trying to fur
lish explanations of the price move
nent. The most tangible of these is
hat the road viii soon pass TO the New
Haven under lease, guaranteeing payment
II dividends on Boston and Maine stock
It the rate of S per cent a year.
Whatever may be the underlying rea-
on the fact is undeniable that for many
lays past Northern Pacific has shown
marked strength RumOr has not fur
ished anything to account for this char
cteristic Of the stock. and this in itself
s not without significance. II the street
al rumors about an increase in the
iVldend rate, or of an extra distribu-
ion Of any kind there might be a sus-
icion that manipulation to make a mar