Evening journal., 1912-11-18
STATEMENT OF PERCVA HILL PRESIDENT OF AMERICAN TOBACCO

contemplate collusive and feigned
competition in the face Of such an
army OF witnesses. and in the teeth
OF iniunctiye provisions OF a decree
disobedience to which would lead TO
condign punishment.
What will be the effect Of the COM
petition? No man can tell, but that
the competition is real and will con-
inue to be real is absolutely true.
Market Value OF Securities.
The American Tobacco Company
itself had outstanding six per cent.
bonds, four per cent. bonds six per
cent. preferred stock and common
stock. In view Of the fact that it
had been earning a large surplus, and
that the common stock alone had vot-
ing power, the real and ultimate
ownership may be said to have been
vested in the 100 common stock
holders.
The American Tobacco Company
held in its treasury all, or a majority,
OF the shares OF various companies
whose stocks were not dealt in at all
Its securities that we're outstanding
at the time. of the disintegration had
only been issued in 1904, and Govern
men proceedings were really insti-
tuted in the Spring Of 1905.
The common stock of The American
Tobacco Company had sold always
under the shadow of an impending
Government litigation. but on account
OF its large earrings II had had an
average price Of substantially over
400
I'm the court proceedings looking
to the disintegration, there was most
detailed statement. given under oath
as TO the earnings and properties be-
! hind the various securities distributed
and the securities of the new com.
panies formed. So that all men haC
an opportunity to learn for themselves
the value of the properties.
After the disintegration, all of these
securities sold out from under the
shadow Of a Government suit for dis
solution. and il is well know that
securities whose market value is low
compared with their par value. sell
for nearer their real value than those
whose market value is very high
These things explain the difference
| in market values in the aggregate. o.
what has come to the common stock
holders OF The American Tobacco
! Company, as compared with the mar
ket value of their stock before thl
disintegration.
The fact remains. though. that tn,
I disintegration, taking into account thu
necessity involved in paying off a
cash and at high prices the six pc
cent bonds and the four per cent
bonds of The American Tobacco Com
pany, and taking into account the in
creased rate of dividend on the Lig
gett and Myers Tobacco Company pre-
ferred stock and the p Lorillard Com
pany preferred stock as compare,
with the old The American Tobacco
Company preferred sock, entailed al
actual penalty inflicted on the com
mon stockholders of The American
Tobacco Company amounting to man.
millions Of dollars.
Buyers on the exchanges were will
ing to pay the full value based upol
income at least, OF the old The Ameri
can Tobacco Company's common stOcl
which sold at very high price com
pared with par. and which was subjec
to the jeopardy Of an imminent o
pending suit by the Government whic
had in it the threat of the possibilit
OF a receivership.
They not unnaturally, are willing {
pay a larger amount in the aggregate
for the different things that now reI
resent what this old stock did repre-
sen, when the imminence of the Gov
ernment suit is at an end.
They undoubtedly realize that ther
is competition between the companies
and that competition may mean reduC
ion Of profits. They believe, alsC
evidently. that in the tobacco busi
ness competition, while il reduces tn
percentage Of profit, will likely in
crease the volume of business to sue
an extent that the amount Of profit
of a competitor will not be diminished
Undoubtedly i'm the tobacco bus
= ness. competitive efforts do increas
volume of business, and whether sue
increase of volume will serve to mair
, tain or increase the amount Of profit
in the face of the additional expens
in marketing goods, remains to
, seen.