New-York tribune., 1922-11-13

new concern starts out handicapped by
the nature and cost Of it's financing
The chief assets behind the 8 per cent
interest-bearing certificates, which
must in three to Ave years be con.
verted into preferred stock. and be-
hind the certificates for the common
shares. which the Elliott squadron of
statesmen, numbering something like
800, are freely offering to a wide mis-
celiany of prospective buyers, CON-
sist of three rather arbitrary items:
Eranchlse pra and territorial rights $500, 600
investment in subsidiary com '''''
'''''''.. .'............1,8 800. 900
AS students Of corporation finance.
we would be interested in learning from
the management of Manhattan Pieylv
Wiggly how these sums were ascer-
tanned, and, since that balance sheet
ana income account lack definiteness.
we would be glad to consider, for nuh.
llcatton later, more illuminating de-
tails furnished directly to US by Mr..
Eiilott's organization. Up to the pres
ent we have been unable to pet such
information directly, even about such
companies as James W. Elliott's Bust
ness Builders, Inc, and the Man Mes
sage Corporation, Of which Mr.. Elliott
is president, which are no longer SELL
ing additional securities for expansion
purposes.
Since in the period under considera-
tion the Manhattan Piggly Wiggly
Corporation showed an operating loss
of more than s127,ooo, the value Of
the franchise and territorial rights
obviously is not based on established
earning power. 1t apparently Is not
based on cost either. It is reported
that Mr.. Elliott bought the franchise
FOR New York from an individual who
had paid some $4,000 and that Mr.
Elliott gave the other man reason
able profit for it. The figure $500 .o0o
evidently represents a capitalization Of
what the Elliott group think the fran
chise and the territorial rights will
be worth In the light of future earn
ings, assuming that the stores now
opened and to be opened subsequently,
Wall at length be run on profitable
basis. In brief, the figure seems. In
large measure, to be the capitalization
Of hopes and expectations. IN von
@lsn TO exchange cold dollars for
these?
The placing Of more than half a
million dollars on the asset side under
the heading Reorganization" NAV nrov.
nothing more than that the corporation
is still promotion and should not be
Judged by the austere standards of book.
Keeping applied to fully established con-
Germ. 10 those of academic inclina-
tions, 1t would be interesting to ascer-
TAIN what items make up this aggre-
gate which is necessarily rather large
.h lauhchlng new enterprise of the
magnitude of Elliott's ambitions. But
the unconditional conclusion remains
snat TINS asset represents a large
measure Of deadweight, which will
tend to thin out future earnings until
1t can be written off in part and
eventually in entirety. The invest
ment Of s1,So0,oo0 in subsidiary cor
poratlons evidently reflects the fact
that the Manhattan piggly Wieelv
Corporation is holding company as
well as an operating company, keep
ing in Its treasures the securities Of
such subsidiaries as the Western Nav
York Piggly Wiggly. Query to Mr..
Elliott: Does $1,SO0,000 represent the
par or nominal value of such securities.
and. ii not. on what basis were thew
taken over7
Despite the fact that cash is con-
ssantiy pouring in through the sale
81 additional Manhattan Piggy Wiggly
Corporation securities, Che amount Of
cash on hand on August 81 appears TO
have been only $8,6O1.33, an unduly
small proportion Of total assets Of
s3,409, ,5SS.64.
Perhaps 1T was this very condition
which influenced certain standard fac
tors IN the wholesale grocery and allied
neid to decide to do no further busi
ness with the Manhattan Piggly Wig
gly Corporation except on a cash basis
we are informed that concerns of i'm.
portance have stated they did not pro.
pose to do further business with the
corporation. We have no intention n
enter into any phases of the cornora-
tion's private business except those
which are relevant to the problem If
the investor asked to purchase the
Manhattan Piggly Wiggly securities
Ihis question Of access to the whole.
sale markets is directly pertinent, for
n n the circular on Piggly Wiggly which
9nr. Elliott made available to MS this
statement appears: "The chain store
mas become an established institution
With the American public, because Of
the !, tact that it is most efficient We.
nscle for distributing goods from the
producer to the consumer. The bena-
hts resulting from large quantity mr.
chase and organized distributions make
possible lower prices to the Consumer
ana th's more economical process H.
the chief element in the success Of +ha
chain store" The observation il cor
reces in our opinion, and it illustrates
are.
another invisible factor, which doaa
not M appear. in. the financial Statement
s. { .,.,-se S the Scontractual relatinns
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