Wauwatosa news. [volume] (Wauwatosa, Wis.) 1900-1948, 1920-05-14
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NoiAp1h1 LANSt pay at least ten per /
eent-hslf for bona fide DIVIDENDS and
half for depreciation"
"ohow said Cullen. opening his
eyes. rs that why the big mining
companies pay such big dividends? /
thought it was all clear proht!"
No. sir. The dividends of min
ing company have 10 be very high to
be attractive at all; they have TO
make good that depreciation. Well.
we make the boys incorporate, as |
said. for two million dollars. on which
we can pay ten per cent. I'll show
you what the setup looks like" He
wrote on the back of an old envelope
Capitalization S2000,O00 = 100000
shares at $40 each.
Now, the company (and you must
remember that so far we haven't
any official connection with it,. agrees
TO take over the property, and pay the
present owners for II with S00eJ
shares of stock, and ii also agrees 10
sell TO you and Angela and me the
other 10000 shares at dollar apiece.
or $4,000. of which we agree To pay
half in cash. and the balance in about
ninety days.
Now then. we own 10000 shares
for which we've paid. and agreed TO
pay $4,000. That is. we've under
written these shares for dollar
apiece, and paid down half the amount.
Now let's begin 10 look at it from the
public's standpoint. Here's mine
with plenty of ore; ard a company
with cash enough on hand to begin
though nobody pretends thar it's ae-
tually producing now. 1t has 100000
in the hank. and another $4,000 due
in ninety days. 1t can 60 ahead and
contract for machinery and wor' men.
and ii does. and you and Angela and
manage il. but since we're IN control
of the stock, we either elect ourselves
as directors. or elect other people
whose names carry weight with the
public. SO that we can always d rect
the general policy, and see that It's
careful and conservative. From every
angle. then, financial and moral, the
venture looks like a big success. So
you and Angela and | go to good
broker, or to group of brokers, and
make them proposition. We con-
vince them of the value we have; we
let them send their own engineers out
TO make a report, and as evidence of
good faith, we pay all their expenses;
we let them go over our books. Every
things fair and square and above
board. And we agree that these bro-
kers will take some of this stock of
our hands TO sell to the public (be-
cause they've got a selling organiza-
ton already established, and plenty Of
customers who look to them for adj
vice. and it's agreed that they'll pay
us-say, four dollars share for what
they think they can SELL The brokers
then do some advertising, send out
their circulars and bulletins ard
pamphlets to their customers. and sell
that stock to the public for anywhere
from six to eight dollars share. That
is, the public is glad enough. when the
prospects a good one, TO pay seven or
eight dollars because every shares
going to be worth ten) for what cost
the broker four dollars. and cost us
one dollar-which we've already got
back from the brokers, and we've still
got the half of those 10000 shares of
ours left besidesl So here's the final
balance sheot!'' He hastily tota ed
the list. ami handed 1t over to Cullen.
capitalization s2.OOOooo-2OO.oOO shares at
Stock paid to individual
owners ACKNOWLEDGEMENTS. so 900 shares
Stock sold to syndicate for
$4,000 900 shares
iotal 20 600 shares
We sell to brokers'. -. $1,000 shares
Leaving ACKNOWLEDGEMENTS. 30 900 shares
We give brokers a two year
option at s. apiece on...... 5000 shares
Leaving ....................... 7O,000 shares
We pay lawyers. experts etc. 10000 shares
leaving ........-,........... 60,O00 shares
"And that balance of 10000 shares"
he said, belongs TO us three. Tie
brokers are making a market and es-
tablishlng a price; and in order TO pro-
tect themselves. they can't afford 10
let the stock sell under the price
they're charging the pubic-because
II they did. the public wouldn't buy up
the rest of what the brokers have to
sell, but they'd buy it In the open mar
ket So the brokers protect the mar
ket by what's considered perfectly
legitimate means. although some folks
call 1t manipulation, and they keep the
price up by main strength until the
first dividend is paid. and after that
they don't have to worry, because now
everybody sees what a good thing II is,
and flocks in TO take advantage Of 1t,
and the quotations jump up to twelve
or fifteen. Everybody's made money
the brokers have made theirs; the pub.