The Washington herald., 1907-05-07
WALL STREET NOTES
Talk of Union Pacific Con-
Germs Money Needs.
RUMoRs OF "CONVERTIBLEs'

/ coming soon - Pressure Exerted
Against Delaware and Hudson.
Reading starts Up, but HaIts with
Attack on Other Stocks.
New York, May 6.-All the talk on
/ Union Pacific to-day was concerning the
/ form of financing the roads capital and
| requirements for the current year. In
/ some quarters. it was said that need for
money to pay for equipment was imme-
diate. and that announcement of a COM
/ prehensive plan TO provide for this and
/ future contingencies would probably be
made before long The general supp0si-
4 ton was that the road would make an
/ issue of convertible bonds, but opinions
diered widely as to the terms of con-
yerubility, and in fact there was nothing
/ ike unaBmity as TO what rate of interest
/ the bonds would pay. Some traders said
/ they could not see how the prospect Of an
issue Of bonds and the prospective ex-
| change of these for stock could be re-
gaTded as a bull argument on the existing
| common stock, but others Of wide expert
/ ence argued that while this prospect was
not particularly alluring. it would be un-
safe TO conclude that the stock could not
! advance in the face Of it.
There is nothing so unusual in the
/ spectacle of stock being held up IN
order TO help the fotation Of an issue
/ Of bonds that there would be any diff
Guilty IN finding a parallel instance of II,
and ultimately il may be found that the
rise Ia Union Pacific was really designed
10 assist the road in obtaining money for
needs not generally recognized
The advance in the stock has served
to restore confidence in the earning power
of the property and whatever increases
confidence in the earning power OF the
road serves to stimulate the investment
demand for its bonds If the bonds are
10 be made convertible, the reason why
any advance in the stock that seems. 70
forecast the continuance OF the 10 per
cent dividend rate should help the pro-
posed new financing becomes all the
clearer
The convertibility. that speculative fea-
ture which is expected TO make the bonds
attractive far beyond the measure Of their
direct interest return. viii be valued ac-
coTdlng as the market value Of the stock
into which they can be converted is close
20 or above rather than considerably be-
low the issue price. A sustained advance
in the stock would. therefore. be a very
natural preliminary TO an issue of con-
veruble bonds. as in this way the success
Of the Hew financing could be assured
before 1t was announced.
During the Interstate Commerce Com
missions investigation Well-knoWn
I banker testified TO how much his firm had
done for Union Pacific merely for the
sake Of helping the road, and, perhaps
the present movement Of the stock. in
furnishing "A favorable opportunity for a
possible sale of the convertible bonds. is
but another instance Of disinteresred love
OF the property.
Because the Atchison bonds are made
/ convertible at par is no reason TO assume
that the Union Pacific bonds, If this road
really intends TO make an issue OF CON
verubles, viii be made convertible on the
same basis. Union Pacific is selling
I closer TO l50 than AtchisOn is 10 par. and
as the credit OF the former road is higher
than that OF the latter, a Union Pacific
. per cent bond. convertible into common
stock al 10, would probably find a much
better market than an Atchison bond
bearing a similar rate OF interest but
convertible Al par during a similar period
lt the rate IS made 3 per cent, and the
cOnyerubility is az figure more favor
able 10 the holder Of the bond than lsl.
the rights on Union Pacific may be Of con-
siderable value andf In all probability,
will be shared by the preferred stock.
which, perhaps, furnishes one reason for
the recent advance in this usually active
issue.
But with al the ingenious theories about
Union Pacific. the stock is as much
mystery now as it was weeks ago. when
its price was decidedly lower. Rumor ran
riot then, and II has been running riot
since. stories Of forced liquidation by
rich men, OF internal strife. OF attacks by
the Federal authorities and the govern
ments of individual States, and of a redue-
ton of the dividend, ultimately giving
way 10 others of an entirely different
tenor. Assurances that the dividend rate
would be maintained; that earnings of
the current year would be equal 20 % per
cent on the stock: that a distribution
would be made of assets. and that new
financing had been practically arranged
these certainly gave a spice of variety TO
the speculation in the stock that has been
particularly relished by the trader who.
in the past few weeks, found little of his
taste elsewhere.
At the opening OF the market there was
a strong bear tip on Union Pacific on the
ground that the technical position had be
come weakened by a bull account of very
miscellaneous character, and that a good
deal of this could be shaken out, since the
maturity of alleged plans to distribute
some form Of security representing the
company's investments in the stocks of
other roads seemed to be still far off,
1T is not a distribution Of assets that
we should look for" said bear operator.
'but a distribution Of stock. and that is
now going on here right under our noses
As far as appearances went. it looked as
If distribution of stock by the pool was
really in progress, but it was, of course,
possible that the intention was 10 shake
ont a weak bull following and encourage
the growth of a short increase. so that
the technical market position of the stock
might be restored to its former condition
Of strength.
Pressure was exerted against Delaware
and Hudson on the ground that as this
road would he affected but little by a
shortage Of Western crops, decline in its
stocks would indicate that the market
was suffering from other ailments than
those reflected in the advance in cereal
prices. Except as an indication of in