Elbert County tribune and Elbert County banner., 1920-08-20

'Exactly." said Hilliard. $50 the
company muss pay at least ten per
cent-half for bona fide dividends and
half for depreciation"
'OhoT said Cullen, opening his
eyes. ''Is that why the big mining
companies pay such big dividends? 1
thought 1t was all clear profitw
mo. sir. The dividends of a min
ing company have to be very high to
be attractive at all; they have to
make good that depreciation. Well,
We make the boys incorporate, as 1
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 100000 - 200. 600
shares at $40 each.
Now. the company tand 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 it with 10000
shares of stock, and it also agrees to
sell to you and Angela and me the
other 10000 shares at a 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 a dollar
apiece, and paid down half the amount.
Now let's begin TO look at 1t from the
publlc's standpoint. Here's mine
with plenty of ore; and company
with cash enough on hand to begin
producing at a profit very soon-al.
though nobody pretends that it's ac-
tually producing now. 1t has 100000
In the bank, and another 100000 due
in ninety days. 1t can go ahead and
contract for machinery and workmen.
and 1t does, and you and Angela and
l are still letting the former owners
manage it. 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 direct
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 I go to good
broker. or to group of brokers, and
make them a proposition. We con-
vince them of the value we have; we
let them send their own engineers out
to make 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 off
our hands to sell to the public (be-
cause they've got selling organiza-
ton already established, and plenty of
customers who look to them for ad-
vice. and It's agreed that they'll pay
us-say. four dollars a share for what
they think they can sell. The brokers
then do some advertising, send out
their circulars and bulletins and
pamphlets to their customers, and sell
that stock to the public for anywhere
from six to eight dollars a share. That
is, the public is glad enough, when the
prospects 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 besides, So here's the final
balance sheetT He hastily totaled
the list, and handed 1t over to Cullen.
capitalization 1900. ooo-2oO.ooo shares at
$40
Stock paid to individual
owners ACKNOWLEDGEMENTS. $1,000 shares
Stock sold to syndicate for
SzV,VO 100 900 shares
Total .........................2O0 200, 900 shares
OF our 10000 shares
we sell TO brokers'. 10000 shares
Leaving Observation-Disclosures. 10000 shares
We give brokers two year
option at IS apiece on..... 10000 shares
Leaving Observation-Disclosures. 00l0 shares
We pay lawyers. experts etc. 10000 shares
Leaving OBSERVATION-DISCLOSURES. bO,ODO shares
"And that balance of 10000 shares"
he said, belongs to us three. The
. brokers are making a market and es-
tablishing price and in order to pro-
tect themselves. they can't afford to
let the stock sell under the price
they're charging the public-because
If 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 it 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 good thing it is,
and focks in to take advantage of it,
and the quotations iump I'D to twelve