The Washington herald., 1912-11-23
Where Wall Streets
Melons Ripen

Copyright, 1872, by c. NJ. Keys, New
York;
In Wall Street these days. there is
much talk OF melons" 1t is supposed
that half dozen Of the big industrial
companies have very good melons rip
enlng, which will be cut up and distrib-
uted in the course of time to the stock
holders. Such condition, OF course, leads
TO enthusiasm and is sometimes made
the occasion for a market boom. II IS
so long since Wall Street has had
period o. melon cutting that it is dis
posed to make the best Of the present
somewhat limited era.
To cut a melon in financial phrase
ology. means to distribute to stOckhold-
crs something more than the regular
ash dividend. Sometimes the melon
takes the shape of distribution of new
stock to the stockholders without asking
them to pay anything at all for this new
stock. and other times the stockholders
are entitled TO subscribe for the new
stock and pay for il at a price well be-
low the prevailing market price. Oc-
cssionally. as in the case OF one of the
express companies a few years ago. a
bond issue is created and given free OF
charge to the stockholders. More fire.
quentIy. however bonds are issued and
the stockholders are allowed to subscribe
for them at a price that will probably
show profits Once in a long time. as
in the case OF several Of the coal roads
during the past couple of years. some
new company is organized and its stock
is given away TO the holders of the old
railroad stock. \ melon. in fact, may
take any one OF great number of forms
and be equally good to receive.
Technically. melon Is known by the
name of rights" When. for instance. a
stockholder In a railroad whose stock
is worth $l75 a share, gets a notice from
tine company that he has a right to sub
scribe $lO0 for one share of new stock
for every four shares of old stock which
he holds. this privilege is technically
called a right 1t has an immediate
market value. and may be disposed of,
il its recipient desires to sell it, As a
matter OF fact for every share he owns
he can sell his right for SIS. The
rights" therefore. are equivalent to an
extra cash dividend Of S15 share.
A good many people are puzzled from
time to time by this matter OF rights" "
In the case of one OF the big Canadian
roads, the writer encountered a stock
holder some years ago who had had
the right to buy one share OF new stock
at 800 for every five shares he owned.
He had not had the money to make the
subscription for the new stock. so he
had simply dismissed the matter from
his mind. As a matter of fact. his
rights" had been worth about so a
share, so that he had simply thrown
away that amount OF money. This hap
pens in a great number of cases, al
though the companies make every pos
sible effort to inform their stockholders
about what they can do in such case.
There Is another point about rights
or melons that puzzles the small
stockholder Let us take the case, for
Instance, of one of the large industrial
companies which recently authorized a
80 per cent dividend to its stockholders.
Every holder of 100 shares OF this stock
on December 81 this year will receive 30
shares of new stock as a bonus without
any payment for the same. II a man
buys 100 shares on December go he will
receive in a short time 20 more shares,
and he will have l30 shares. Suppose
that he pays $3.50 share, or $lSOO0. for
the 100 shares. 1t is obvious that il the
price of the stock continues to be the
same in the market on the first of jan
uary as II was on the 30th of December,
this man woIld be able 10 turn around
and sell his 100 shares for $4,000 and
still he would receive the 30 shares later
on and would thereby make a profit of
$500
The financial world does not tolerate
profits as easy as this. Consequently
Gu the day the rights expire in this
case. the stock will sell on the stock
exchange "ex-rights." II 100 shares
were worth $4,000 on December %, the
I3D shares which the buyer would own
as of January !. would be worth SIS, 900
and the price of the stock "eX-riShts''
will probably be about $40 a share in.