The Washington times., 1924-03-14
NON-PAR STOCK
|SF|ND|NC
FAVOR
Large Industrial Companies
Changing Capital to Stock
of No Par Value.
BY w. s. COUSINS.
Copyright, 1924, by Cosmopoli an
News SerVice)

News Service)
NEW YORK, March 14.--A large
number Of prominent American in
dustrial companies, old and new,
have, up to today, changed over
their capital structures to stock of
no.par-value, Studebaker, being the
latest to seek admission to this list.
The use of no par-Value eliminates
the misleading dollar mark in stock
issues. The investor is not deceived
by the fictitious 500 par value
printed on certificates which may
represent An actual. value of more
or less than that amount-in the
majority Of cases considerably less.
The theory of no-par stock is that
outstanding shares are merely an
evidence of pro-rata interest in CAPT.
tai and earning capacity, whatever
they may be, and not in any way
measure thereof.
Helps Investor.
The intelligent purchaser Of such
shares Is put upon inquiry as to
the actual value Of stock offered,
and does not take his cue from
valuation printed on the certificate
To arrive at an intelligent conclu.
sion he must ascertain the probable
value of the company's assets, it's
earning capacity and total number
of shares outstanding; from these
he can and should judge for him
self as to their actual present and
future value.
1t Is obvious that q great measure
OF protection for the investor in nc
par stock issues Is that of depriving
promoters of corporations of the ad.
vantage Of inflated capitalization and
Of focusing the attention of the in
Vesting public upon the real value
Of the shares. So highly is this
matter regarded in some places that
one State designated its no par stock
law as IAN act to prevent corpora
ton stock watering and fraudulent
practices, etc. Since State and
Federal laws prohibit the sale of par
value stock below par price, there Is
a great temptation to circumvent
this law by placing fictitious values
on "other assets taken in exchange
for stock, and most often the public
pays the bill.
Lower Tax Rate.
Practically the most advantage
issues is the lower tax rate and
removal of stockholders liability.
The second is obvious from the fact
that the stock is fully paid and
worcestershire on issuance. AS to
State and Federal taxes, wherever
there Is an advantage. it Is gener.
ally in favor of no par stock
The Federal organization tax is
< n Oh nj V1 or
and / cent on every $40 Of real
value on no par stock The yearly
franchise tax in New York State
is one-tenth Of ] per cent of the
actual value, computed by sub
tracing actual liabilities from
assets, or by figuring from the
average price of which stock sold
during the year.
Marketwise, the first effect of the
announcement of large split-up Of
high priced stock into two or three
times as many shares of no par
value, is a decline in price, on the
theory that the floating supply oof
stock has been materially increased.
But bear traders also remember
that in covering they must buy in
two or three shares of stock for
every share they sell short, and are
/ therefore inclined to caution. Most
of the recent conversions TO no.
par stock have been to advantage
! of the investor in increasing annual
dividends on his gross holdings.
To corporations an advantage has
been the enlarging of their circle
of investors, always a desirable fea-
ture
Since the legalizing Of no par
| stock in New York in 1912, the
number Of corporations listing such
stock on the stock exchange Is
1879: Of which manufacturing and
industrial companies number IA;
oil companies, %; mining COM
panies, 9; railroad companies, 1. AS
Stunning a valuation Of about $40,
the total valuation Of these shares
would be $4,000, 100000 gaainst $19,-
900 OO0, 900 for par value stocks.