The sun. [volume] (New York [N.Y.]) 1833-1916, 1911-07-01

1901 was 81. .457, ,OoO.OOO. The difference
between the Government and the cor
borations estimate is found chiefly in
the valuations of the orc properties. The
bureau of corporations sets $lO0, 900, 900
rs a liberal estimate. while the trust
officials value the properties at S7Oo, ,Ooo, 900.
Commissioner Smith charges that the
corporations excessive estimate on the
ore properties was made to cover the
water" In the securities.
Commissioner Smith finds that the
average rate Of profit on actual invest
ment by the Steel Corporation from its
organization until the end Of last year
was IL per cent The Commissioner
points out that this amounts practically
70 maintaining a profit level Of IL per
cent on one half Of the entire steel
industry in this country.
THE BEGINNINGS OF THE CORPORATION
The Commissioner in his report takes
up first tho causes of tho formation Of
the steel Corporation. and his findings
seem to bear out in part the recent testi
mony Of John W Gates before tho House
investigating committee Until about
1895. ha points ont the bulk Of tho stool
business was distributed among a very
considerable number Of concerns. and
there was sharp competition. modified
by frequent pools and price agreements.
In 1898 began an era of great consolida-
tions, with captalizations ranging from
$40, 200 900 to siOO. 900. 900. the ruling
motive, as in the earlier price agreements.
being the removal of competition
The creltion Of new securities for the
sake Of stock market profit was. the
Commissioner holds. an important con-
sideration in these earlier consultations
in the steel industry
The importance Of this stock market
factor in Tho consolidation movement"
eays the Commissioner. whether in the
Iron and s.ee industry or in other in
dustries. is too often overlooked Con-
eolidation. while in large measure an
outgrowth Of technical and industrial
conditions. was by no means exclusively
so Instead there was frequently
mark ed reluctance on the part of owners
to dispose of the businesses they had
built up. and in many cases the controll-
ing inducement to soil ont was tho enor-
nous price obtainable in the securities Of
these great consultations
INITIATION OF VALUES
The report cites the consolidation of
the wire interests as an illustration of the
great imitation of capitalization In the
organization Of the American Steel and
Wire Company Of Illinois. in March. 1898.
zach 500 of the stock of the Consolidated
Steel and Wire Company. one Of the
constituent concerns. received $l75 of
preferred stock and Sl75 in common
stock Of the new company. or $3.50 of
new s.curities for every 500 of old.
A few months later each 500 Of preferred
stock Of the American Steel and Wire
Company OF Illinois received 500 in
preferred stock and $50 in common
stock Of the American Steel and Wire
Company Of New Jersey. while each 500
OF the Illinois company's common stock
received $l2O in common stock Of the new
concern. Thus each 500 stock of the
old Consolidated company became $500
In the stock Of the New Jersey concern.
and there was a still further increase in
the merger of the American Steel and
Wire Company Of New Jersey into the
United States Steel Corporation. The
Commissioner adds:
noteworthy feature OF this general in
hation Of securities was the heavy stock
received by the promoters
OF these consultations as their compensa-
ton. In the case of the American Tin Plate
Company. $40. 900. 600 OF common stock ,
admittedly went to the organizers. ard in
the case OF the National Steel Company,
and also OF the American Steel Hoop Com
pany, at least IS. 900 900. In the organization
tha A,,,a a,,I
sli 900 900 Of the common stock vent 10 the !
promoters and underwriters. In the or
ganization of the National Tube Company. |
$40. 600 900 OF common stock appears TO
have been used as commission to the |
promoters and hackers, and in the case Of !
the American Bridge Company az least
q. $50 .oOO OF common stock. and possibly
twice that amount. the underwriting syudi- !
cate OF the Federal Steel Company received
approximately s5.ssO,ooO preferred stock
and 81, 100 900 of common stock in return
Tor approximately fsoNOO0 cash and their
services in organizing that concern There
were similar large payments in the case of
some Others of these steel consultations |
Out OF the proceeds OF such stock COM
frequently some organization |
expenses had TO be met. but i'll the main |
these commissions were intended as com !
pensaton to the promoters OF these con- |
II should he noted that the size |
OF these commissions frequently was fixed
by the promoters themselves. since they |
determined the capitalization of the con |
soil dated company.
The Commissioner points out, however. |
that these earlier consultations in the |
steel business did not accomplish their /
purpose OF removing competition. On |
the contrary. broad movement at once I
became apparent which threatened com I
petition on a larger scale and probably |
more severe than ever before in steel |
history. This movement was the ten /
dency Of the larger steel plants, both |
those which produced crude and those
which produced lighter finished products.
to extend the entire industrial process
from the ore to the finished product
linking up ore and coal mines, trans
portation, blast furnaces, steel works.
-olling mills and finished manufactures.
Such efforts on the part of these great
in striving each TO "integrate."
or make itself wholly Independent,
to result in great and sudden
increase and duplication of the steel
producing and finishing capacity of the
country and to involve them also in
IN invasion Of one anothers business.
Thus was suddenly disclosed to the in
1ustry the prospect Of IAN impending
OF giants" contest between
great concerns which might he forced
o work out in rigorous competition the
survival of the fittest Thi. critical |
rade situation in 1900 was intensified
he bureau of corporations points OUT