New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1922-08-20
beaver & Rio Cfantle

onestion-4 Would you please state in sun.
gay issue II seu know whether the gov
erhanent ~ snen 20 inquire iffto the sisu4
alton OF the Dsnver * Rto Grande Rail-
noaa ana the ousting OF the common
s and greferrsd stockholders Of their equity
snsrsin2 worked hard ia this city for
tssrty years to save the money go buy my
prefeTred ntoek of the Oldest and best
s xmow W stocs broker. paying 1850 share
sor ~ me only received cue ak months
dividend and then was notified that In.
the future the dividend would be used 20
pay the interest on the bonds OF the Wesf-
err Pacific. which evidently wan not done
Teen followed the sale of the Western pa
eine Tor $4,000 ooG. With s2.eeo 600 In the
treasury of sanss. Then came the sale OF
the Denver itself for a paitry SIS. 900. GOO
This road. az every one knows In one or
tbs best Ia the West, and Was used as
the Western Pacific as the Missouri wa
too weak TO stand for t. although II was
for that roads benefit and would then
also SIS, coo, 900 of the Denyer's money
taken for the Same usage. This money
WIS, Of course. the equity OF the stock
holdeSs Wherein, Also other valuable prop
critics OF the Denver have been taken from
that road. These proceedings 3ill soon
come under the so-ealied statute of lifni-
tations---T. 8.
Answer-Wa know of no impending
proceedings by the government to in
quire into the affairs of the Denver &
Rio Grande Railroad Company. Its
sale to the Denver & Rio Grande
Pacific interests, at the upset price of
$1,000, 600 was effected under order of
the court and, it is important to note,
WAS subject to approximately $122,-
100000 funded Indebtedness of the
company. Recently the committees
representing tho old Denver g. Rio
1 Grandc eondholders have succeeded in
obtaining the appointment of a re-
ceiver for the Denver & Rio Grande
Western ms q measure to protect their
interests, but it is hardly likely that
in any adjustment which they may he
able TO accomplish consideration will
/ be given to the interests OF the stock
holders. The Western Pacifc's offer,
withdrawn following the receivership.
made no provision for the latter. In
this respect the reorganization g fol-
lowing lines that are strictly usual.
You must realize, in attempting prop
erlv to value the situation, the differ
ence between 3 stakeholder and a
bondholaer in a corporation. The for
nser is. in effect partner in the en-
terprise, the latter a creditor whose
fxed-term obligation bears an agreed
return. The stockholder enjoys the
opportunity of increased profits dur
suntes the responsibilities and risks
on bad times and financial crises. The
hondholder has definite claim that
must be taken care of before the
stakeholder receives a cent on his in
vestment. The latter's equity is only
what remains when all creditors have
been provided for. If the interest,
sinking fund or principal of bond
issue is not met when and as due
the bondholders Of g corporation
through legal resort may take over the
property in satisfaction of their
claims. They are not entitled to more
than an amount sufficient to cover
Their equity. In the case OF the Dem
vef & Rio Grande there appears little
chance Of there being anything left
for the stockholders, but that will not
finally be determined until the adjust
ment of the eompany's affairs has
been completed. If there has been any
violation of the law in what has been
done the stakeholder may institute
proceedings to recover. Otherwise, he
has taken risk and lost. We sympa-
thize with your position, but what has
happened in your case is merely an
other example of the Importance of
careful investigation and thorough
grasp of the principles of investment
before sinking money in an enterprise.