The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1912-07-19
Only Directors Are Allowed to
Share i'm Increased Wealth.
PROBLEM STILL UNSOLVEL
Congress Still POwerless to
Control Trusts.
New Plan of Banking May
Help Central America.


directors were enriched by an aggre-
gate gift of $7,500,OO0. This was done by
the method Familiarity known as CUT
ting melon" In other words these
directors were permitted to suoscrlps
for almost exactly 100000 shares OF the
enlarged capital of the British-Amerl-
can Tobacco company at the rate OF
$3.50 share, the par being So Yer
at that time the market value OF TINS
stock was $25. Therefore, these dlrec-
tors found themselves enriched by the
difference between the $3.50, which they
paid, and the $25 which was then the
market value of the stock. That took
place about Easter time. Since then
these directors have made larger pro-
hts. The melon, so to speak, has
grown, although the dispatch from
London does not refer to this fact. The
market value of the stock of this com
pany is now not less than $2S a share
The situation offers no temptation
or, in fact, opportunity-to those who
desire to look at this stock specula
lively. 1t is not the kind of security
which any one who wishes to make a
turn in the market will, if he be wise.
have anything to do with. Whether it
is a good security for sincere invest
ment purpose is another question. The
stock is what is known as curb stock.
For that reason, when it is bought 1t
must be taken up, or, in other words
must be paid for in full. 1t therefore
does not offer any opportunity for spec
as a gamble" While it has been ac-
lively dealt in on the curb the pre-
sumption is that it has been chiefly
bought for investing purposes. And
yet this is a corporation which our
supreme court at Washington decided
was improperly or in contravention to
the Sherman law controlled by the old
American Tobacco company. The his
tory of this corporation since, by rea-
son of the decision of the supreme
court, it was compelled to become alb
solutely independent, in law and name
at least, of the American Tobacco
company, furnishes one of the most
curious and interesting commentaries
upon the real effect of the Sherman law
as interpreted by the supreme court in
the STANDARD Oil and American To-
bacco company cases.
After the Dissolution.
After the dissolution of the Ameri.
can Tobacco company in such manner
that those corporations which had heer5t
subsidiaries became in law and in name |
independent, the stockholders of the |
American Tobacco company received |
shares of the British-American com
pany IN exchange. For instance if |
anyone owned ten shares of the Ameri- |
can Iobacco company their shares of
trust before the dissolution thai
owner received 16 shares of the BRIT
1sh-American company, using these fig
ures for convenience of Illustration.
V. after
this dissolution was made. had no fur
Their interest in the British-American
Tobacco company.
But the directors of the British |
american company were men who mad
been large owners of the American
Tobacco company's stock Chief
am ong these was J. B. Duke If was
with amazing celebrity and accuracy of
business judgment that Mr.. Duke and
some of his associates perceived the
new opportunity which the interpreta-
ton of the supreme court in the To-
bacco trust case had put into their
hands. While the American Tobacco !
company as such no longer owns any
of the stock of the British-Americen
company yet officers and directors Of !
the American Tobacco company as an |
Independent corporation were in con-
troll of the old American Tobacco |
company.
When the Opportunity Came.
For the purpose of increasing the
working capital of the British COM
pany with which greatly to enlarge
its field of operation it was decided
to increase the capital stock. And It
was through this increase and the fact
that as a British corporation the par
of the stock was only five dollars,
whereas the market value was twenty
five that these directors have been
nine million dollars, basing that figure
upon the present market value of the
stock.
are familiar with the affairs of tie |
International Harvester company that |
If the courts or the government COM
mel a dissolution of the company there |
1TrfT follow a distribution of the as
sets of the Harvester company. which /
segregate about fifty million dollars. /
IN other words, the individual stock |
holder will. by reason of this disso- :
luton. find himself in personal pos |
-asSio1 of wealth which was formerly |
represented only by the stock he held
a. the International Harvester COM /
na1v So also, the dissolution of the |
SSfo1dard Oil company has served |
greatIv to materialiZe into individual
6oIdings of stockholders wealth which /
vas formerly held as a general asset
of the old standa Rri+i oh tr T,ar;can To-
4,.cco company is concerned, the cut |
49, of this melon differs from the |
.-~{on1arv transactions of that kind |
4E1a fact that only the fourteen d. |
: -actors have been permitted to receive
sIices of the melon, whereas When !
S,a1J issues of stock have been made
II ANYWAY companies or by banks
py of +he stockholders has had an
eaS1 r,ght with all the other stock |
E6Iders to accept new STOCK at n6eH
nrice and then to gain pronts' ne
cnoos 4ba nrice at which the stock
We a1lotted to him and the market
price. -. +b;s recent piece of
IN L"t H,,,erican financing is looked
Bill &c demonstrating the purpose or
UT company practically ana WltnouC
octnaIiy violating the law 70 uoniiLlaes
- tohacco business as enectualIy as
the Va Tohacco trust did. If this pur-
tiae can be accomplished, tnen II oc-
pore to many persons mere elat co S
,1ress has not yet olscoNe i,I , -
sta Hesitation which viii apSolutely
qu-ee,t com binationS when are mo
PnoIistic or semimonopolistlc. Wneth-