The Lee County journal. (Leesburg, Ga.) 1904-19??, 1920-03-12

4 HNFFF+ff"fN 'f"FN i'N fN"s -
cent--half for bona fide dividends and
half for depreciation"
"Ohow said Cullen, opening his
eyes. "Is that why the big mining
companies pay such big dividends? l
thought Il was all clear profit !"
mo. sir. The dividends of min
ing company have to be very high to
be attractive at all; they have to
make good that depreciation. Wen,
we make the boys incorporate, MS |
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 100000
shares at $40 each.
"Now, the company (and you must
remember that so far we haven't
any official connection with lD, agrees
to take over the property, and pay the
present owners for II with $4,000
shares of stock, and II also agrees to
sell to you and Angela and me the
other 100000 shares ut dollar apiece,
or 100000, of which. we agree TO pay
half in cash, and the balance in about
ninety days.
Nov then, we own 10000 shares
for which we've paid and agreed to
pay 100000. That is, we've under
written these shares for Il dollar
apiece, and paid down half the amount.
Now let's begin 10 look at it from the
publics standpoint. Here's mine
with plenty of ore; and a 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. II has 100000
in the bank, and another 100000 due
in ninety days. 1t can go ahead and
contract for mac inery and workmen,
and it does, and you and Angela and
l are still letting the former owners
manage it, hut since were in coNlrol
of the stock, we either elect ourselves
as directors, or elect other people
whose names carry weight with the
public, so that we can Away direct
the general policy, and see that it's
careful and conservative. From every
angle, then, financial and moral, the
venture looks like Il big success. SO
you and Angela and l go to a 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 off
our hands to sell to the public Che
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 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 Sheet" He hastily tOta ed
the list, and handed it over to Cullen.
capitalization 5000. OOO--9OOOOO shares at
$40.
Stock paid to individual
owners NEUTRALITY-SUSPICIOUS.. SOOOO shareS
Stock sold to syndicate for
100000 .........................l 900 shares
IOLaI OBSERVATION-DISCLOSURES. 6uVVVV SHhIeS
or our 100000 shares
We sell to brokers'. 49,. 10000 shares
Leaving .................. 10000 shares
We give brokers a two year
option at S. apiece on...... 10000 shares
Leaving .......................7 10000 shares
We pay lawyers, experts etc. 10000 shares
Leaving .................. 10000 shares
Sand that balance Of 10000 shares"
he said, belongs to us three. The
brokers are making a market and es-
tablishing a price and in order to pro
tect tn lselves, 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 a good thing 1t is,
and fUcks 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
maIAet the 10000 shares it had left,