Evening star., 1939-05-12
Huge Utility Issue
Revives Fight on
Private Sales
Commonwealth Edison
Placement Expected
To Spur Study
BY the Associated Press.

6S tHt ASSOCldCeQ freSS.
NEW YORK, May 12.-Wall
Streets squabble over private placing
of security issues with insurance
companies and other institutional
investors hase received q fresh fillip
with announcement of the largest
such transaction known, involving
about 115,000.000.
Placing of that amount of deben-
lures of Commonwealth Edison Co.
with IS insurance companies, in
addition to reviving argument by
underwriters and insurance men is
expected also to spur completion
Of the Securities and Exchange
Commissions study of the problem
which began last summer.
In the first three months of the
year the Financial and Commercial
Chronicle estimated, about Is per
cent of the total dollar volume of
corporation securities was placed
either semi-privately or privately.
The total of such financing in 1898
was placed at about 500, ,000, 900.
The growth of this practice re-
fleets, of course, the heavy pressure
OF investable funds In the vaults of
the institutions, as well as desire
of the corporations to market their
securities without the cost of regis
tration with the S. E. C. and to Sc
cure reduction of the underwriters
spread. The institutions gain by
making large single investments in
prime securities without having to
compete in the markets with other
security-hungry investors.
Exchange Volumes Cut.
Underwriters and some OF the
smaller institutions assert that the
latter are placed in a position Of
being unable to purchase the highest
grade issues as a result OF the
growth OF private placement. This.
they assert, acts to the detriment
of thousands of policyholders in the
smaller insurance companies which
are unable to participate in the big,
high-grade flotations.
Another complaint is that private
placement tends to cut volume Of
trading in the country's securities
exchanges and that it discourages
underwriting which is necessary to
the movement of new capital into
business channels.
Inasmuch as the securities pri-
vately are not registered with the
S. E. c.. they may not be listed in
the exchanges and therefore. it is
asserted, may not be liquidated as
quickly as might be necessary
should some sudden strain be put
on the resources of the institution
owning them.
Delays Avoided.
Insurance men and some cor
poration executives, on the other
hand, declare the practice enables
corporations to take advantage Of
the money market without the 20
day delay required for registration.
Prime issues, they assert could be
liquidated by negotiation with other
institutions in case of emergency
as quickly as secondary flotations
could be disposed of in security
markets or over -the-counter trad
ing.
Privately placed bonds 50 far this
year. q rough estimate indicates,
have totAled about $240, 900 900,
which means that underwriters have
lost commissions well over $4,000 =
0O0 That is a blow to the invest
ment bankers who have done none
too we'll in the past year or so
because Of the lag in new capital
financing caused by the 1878 re-
cession.
Wall Street brokerage houses
would like to see all new issues
registered and listed on the ex-
changes inasmuch as the resultant
trading would mean commissions
in a lean peroid There have been
few days in 1899 when transactions
in Wall Street have been heavy
enough to reach the pay point"
for all the brokers, partners in firms
and others involved in the COM
cisSion business.