The daily Gate City and constitution-Democrat. (Keokuk, Iowa) 1916-1922, 1920-04-05
IOWA INFESTED WITH STOCK SELLERS

Sheldon, Iowa, has recently pub
lished a warning advertisement
in local newspapers reading in
part as follows:
"A certain retired farmer in
Sheldon recently purchased
around $4,000 Of stock in a
speculative enterprise located
not many miles from here, and
the other day the promoter was
in Sheldon offering this retired
SPECTATORS notes to the Shell
don banks at $4,000 discount
Needless to say the banks did
not want paper Of a man who
plunges into debt in this reck-
less manner.
"The promoter selling the stock
probably gets another $4,000 for
his profit, that makes $4,000 for
closing a $4,000 deal.
'In other words, the expense
takes half the money at the
start. 1t must be a shady deal
that takes half mans money at
the very beginning. Probably
the other half win be taken from
him shortly"
Another case Of statewide in
terest was that of company or
ganized to establish meat
packing establishment at Des
Moines. In this case an especial
appeal was made to farmers,
upon the representation that it
was intended to give them an
opportunity to enjoy the profits
which had been long monopolized
by the "big interests" They
were told that the stock Of the
large Chicago companies was
closely held and unobtainable,
although several of these stocks
are traded in daily on public ex-
changes. Swift e Co. have 49,
600 stockholders.
The Armour preferred Z per
cent. stock, choice investment,
is changing hands at about par,
while Swift & Co. common, pay
ing per cent. and having bona
fide book value Of about $160
per share, is selling at this writ
ing at about 1923 per share.
These prices are low, but they
have been low for several years,
owing to the overburdened- state
of the investment market. Sales
are reported daily in the Chicago
newspapers, which circulate all
over the state Of Iowa. but with
this opportunity to get into these
old companies, with their expert
enced organizations, established
business and long record OF sue
cessful operations, thousands of
farmers bought stock at par in
this new promotion, which doesn't
even own packing plant. and
confessedly had yet to create an
operating organization and build
up business. Moreover, a large
percentage Of what they paid for
this stock was absorbed by pro-
motion expenses. The attorney
general Of the state alleges that
the company is. insolvent before
beginning to put up It's buildings,
and at his instance a local court
has appointed a permanent re-
ceiver. Over 100000 of stock
was sold. ..
: The editor Of the Iowa Home
stead, a farm journal published
at Des Moines, describes com
mon procedure in such flotations
as follows:
LET me show how a large num-
Der Of the heavily capitalized
companies, now selling stock to
farmers in the state, through
statesmen paid large commits
sions, are operating. They sell
stock to a farmer to the amount
of $1,000, on which the company
receives notes for $3.50, the re-
naming $3.50 having been peck
eted by the stock salesman. This
note for $3.50 is offered to some
bank at discount of say 10 per
cent, which is $75 Of on note
Of $3.50. Even then the purchas-
ing bank seldom desires to pay
out actual cash, but often issues
certificate of deposit, without
interest. due at the maturity of
the note. For the $1,000 worth
Of stock subscribed for, the COM
pany now holds certificate of
deposit for $675--the original
81 900 less the $3.50 paid the
salesman and the $75 discount
allowed the purchasing bank.
"The companies are nearer
their ready cash than before, but
they do not have the real money.
The certificate of deposit in the
bank is offered sec
ond bank and again discount
Is made, often running as high
as Is per cent. This means. that
the company offers the 1875 GER
tificate of deposit for S573.75.
which Is Is per cent. less than
the face value. The company now
has it's money (when the second
bank buys the first banks GER
tificate of deposiD, but it has
only s573.75 for $1,000 worth Of
stock. In a word. it starts out
whatever business it may or may
not venture into with but little
more than one-half the cash
which it is supposed to have for
the stock subscribed" .s..
Competent authorities have es-
that the aggregate Of
stock in new companies floated
in the state of Iowa last year
would amount to several hundred
millions of dollars, and a large
part is classed as highly speclla-
tive. ..s .E.. .
The loss of capital which re-