The Wallace miner. [volume] (Wallace, Idaho) 1907-current, 1917-12-27

company (par value, $50 was listed on
the exchange prior to January, 1914.
On January 2. 1914, the lowest SAFE
was 81 per share, making a total Vaiue
for the stock at that date of upward
of $4,000. 900. The value Of the stock
steadily increased. In November
1915, the Kennecott Copper corpora
ton, having already acquired SUD
stantial interest in the stock. offered
to pay in cash SIS for each share OF
stock in Braden Copper Mines COM
pany.
The Case Of the Chile and Braden
Companies.
In the case Of Chile Copper COM
pany and Braden Copper Mines COM
pany, their stock represents solely the
indirect proprietorship of the mining
properties owned by their respective
operating companies, and the values
placed upon the stocks of the holding
companies as indicated above furnish
true appraisal of the actual values
of these mining properties. In other
words, the mineral properties which
Chile Exploration company holds
against its $l,O00,000 par value of its
stock were appraised by the public in
1915 at upwards of $SO,0OO,OO0. Sim
ilarly the properties against which the
Braden Copper company issued slight
/ L., Of fc n
praised by the public in January, 1914,
at upward of $1S,O00,OO0 and were ap-
praised by Kennecott Copper corpora
ton in 1915 Through it's purchase of
shares of the holding company at SIS
each) at almost $39,OOO,00O
! Enough has been said on this sub
ject to show the tremendous injustice
which would be done these companies
and their stockholders by adopting an
an Interpretation of the law so literal
and technical as to limit the valuation
| of the mineral properties of Chile
Exploration company and Braden Cop
per company to the par value of the
capital stock which these two compa-
MES issued against the mineral prop
critics. 1t is submitted that in situa-
lions such as these, involving hold
/ ing company whose stock is publicly
dealt in and an operating company
whose stock is all held by the holding
company, an equitable administration
of the law imperatively requires the
disregarding of the form of corporate
structure and calls for regulations
which will permit such an operating
company to regard the stock of the
| holding company issued and dealt in
publicly as virtually the stock of the
operating company.
1t is not conceived that any argu-
ment that we could make would add
to the impression that must already
have been made by these two actual
and definite and not hypothetical stu
atoms. In neither of these instances
has the par value of the operating
company any relation whatsoever to
the value of its assets. It~seems to us
that it is incumbent upon the treasury
department to treat the holding COM
pany as single company and that if
the amount of the issued stock is to be
a factor in determining invested cap
ital, the stock issue of the holding
company is to be looked to-
Conservative capitalization Penalized.
I With respect to both of the forego-
/ ing suggestions, we earnestly desire to
call to the attention of the treasury
department and it's advisers what we
believe to be the situation of a great
! the United States. 1t is true undoubt-
edly that the public has often been
gulled into the purchase of stock issu-
ed on vastly inflated basis and so
there has arisen an entirely justifiable
prejudice against the evil of watered
stock. 1t is right for the internal rev.
enue authorities to protect itself in the
matter Of invested capital by such
regulations as will not permit watered
stock to constitute a basis of value
The fact is, however, that the issue of
watered stock is confined to those cor
porations whose promoters purposes,
following the organization of the cor
poration, to sell out to more or less
gullible public. A great number of
corporations, however, for the purpose
of economy in formation, economy in
operation, and because of the conserv-
atism of the men who formed them,
even when it was expected that the
stock would be sold on the market,
have been conservatively capitalized
or greatly undercapitalized
Admitting the evils of stock water
ing, and even If it were admitted that
it has been more prevalent than it has
been, what is to be thought of that
construction of law which makes the
course of corporation whose stock
has been watered so easy, and the
course Of that corporation whose stock
has been conservatively issued, or pur-
posely issued to an inadequate amount.
considering it's assets, so difficult, not
to say hopeless?
1t seems to us that it would not he
putting an undue burden on the. treas
ury department to make the stock is.
sue only prima facie evidence of prop
erty value, giving to the department
full authority and complete machinery