The L'Anse sentinel. (L'Anse, L.S., Mich.) 18??-current, 1920-06-18

half for depreciation"
"Oho!" said Cullen, opening his
eyes. us that why the big mining
companies pay such big dividends? ]
thought il was all clear profitw
NO. sir. The dividends Of min
ing company have 10 be very high 10
he attractive at all; they have 10
make good that depreciation. Well,
we make the boys incorporate, as j
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 - 2OO, 900
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 $4,000
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 pny
half In cash, and the balance in about
ninety days.
Now then, we own 10000 shares
for which we've paid, and agreed 10
pay 100000. That is, we've under
written these shares for dollar
apiece, and paid down half the amount.
Now let's begin TO look at it from the
public's standpoint. Here's a 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. II has 100000
In the bank, and another 100000 due
in ninety days. II can 60 ahead and
contract for machinery and wort men,
and IT does, and you and Angela and
are still letting the former owners
manage IL. but since were IN control
or 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 ! 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 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 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 Il share for what
they think they can sell. The brokers
then do some advertising, send out
their circulars and bulletins and
TO their customers, and sell
that stock to the public for anywhere
from six to eight dollars q share. That
is, the public is glad enough, when the
n 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 dolar-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
he list, and handed ii over TO Cullen.
capitalization 5000 o00-2O0.O0o shares at
$40
Stock paid to individual
owners ACKNOWLEDGEMENTS. $4,000 shares
stock sold to syndicate for
|lZVOW 10000 shares
Total .........................2c 0 coo shares
or our 10000 shares
we sell to brokers'. 80. 10000 shares
Leaving OBSERVATION-DISCLOSURES. $1,000 shares ]
We give brokers a two year
option at % apiece on...... 10000 shares
Leaving ACKNOWLEDGEMENTS. 10000 shares
NE pay lawyers. experts etc. 10000 shares
bca'mB ...s-.................. 6O,OOO shares |
"And that balance Of 10000 shares"
he said, belongs to us three. The
brokers' are making market and es-
abllshing a price; and in order to pro-
ect themselves, they can't afford to
ct the stock sell under the price
hey're charging the publIc-because
4 they did, the public wouldn't buy up
he rest Of what the brokers have to
ell. but they'd buy 1t in the open mar
iet. So the brokers protect the mar ,
iet. by what's considered perfectly
legitimate means, although some folks
all 1t manipulation. and they keep the
rice up by main strength until the
irst dividend is paid, and after that
hey don't have to worry, because now
sees what good thing 1t is, $
ind flocks In to take advantage of Il. Z
md the quotations jump up to twelve
IT fifteen. Everybody's made money:
he brokers have made theirs; the pub
les making theirs. and when the price
g right the syndicate sells In open
market the 10000 shares II had left.
md you and Angela and I have each
made a quarter of a million dollars
Without really rlsking q single cebt