The Dolores star., 1920-09-10

'eht-HaII Ior bona hde dividends and
half for depreciation"
Ohio" said Cullen. opening his
eyes. 'ls that why the big mining
companies pay such big dividends? /
thought 1t was all clear profit"
No, sir. The dividends of 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
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 S2.OOO,OOO - 200, 900
shares at $40 each.
Now, tie 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 1t with $4,000
shares Of stock. and it also agrees to
sell to you and Angela and me the
other 10000 shares at a dollar apiece,
or Sl2O.OOO. Of which we agree to pay
half in cash, and the balance In about
ninety days.
Now then. we own 10000 shares
Tor which we've paid. and agreed to
pay Sl2O.OOO. That Is, we've under
written these shares for dollar
apiece, and paid down half the amount.
Now let's begin TO look at 1t from the
public's standpoint. Here's mine
With nlpDtv NJ ,,J
with cash enough on hand to begin
producing at profit very soOn-nl.
though nobody pretends that it's ac-
tually producing now. 1t has S6O.NOO
In the bank, and another $4,000 due
In ninety days. 1t can 70 ahead and
contract for machinery and workmen.
ana 1t does. and you and Angela and
l are still letting the former owners
manage 1t. 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 big success. So
you and Angela and l 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-
tion already established, and plenty of
customers who look to them for ad-
vice. and it's agreed that they'll nay
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
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 sheet!" He hastily totaled
the list. and handed 1t over to Cullen.
capitalization s. 900. .oO0-2OO. 900 shares at
$40
Stock paid to individual
owners ........................ $1,000 shares
Stock sold to syndicate for
|l0"S .........................l2 2o.OO shares
Total ......................... 100 900 shares
or our laD.OO0 shares
We sell to brokers'. 80. 5000 shares
Leaving ACKNOWLEDGEMENTS. 10000 shares
We give brokers' a two year
option at $ apiece on.... 5000 shares
Leaving ....................... 10000 shares
We pay lawyers. experts etc. 10000 shares
"And that balance of 10000 shares"
he said, belongs to us three The
IL anu eS-
tablishIng n 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
II they did, the public wouldn't buy up
the rest OF what the brokers have to
sell, but they'd buy 1t 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 mp 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 1t is,
and tlocks in to take advantage of it,
and the quotations jump up to twelve
or fifteen. Everybody's made money
the brokers have made theirs; the pub.
lies making theirs. and when the price
Is right the syndicate sells in open
market the 10000 shares 1t had left,