Evening star., 1942-02-08

"stock dividend" which would be
contrary to the public utilities law.
Mr.. Hankin'S suggestion was that If
the stock were sold to the parent
company for $1,000, 900, and If it
could be sold for SIS, 5,O00, 900 on the
open market, then the w. R. & e.
stood to gain the difference or $12,-
000, 900 in the form OF q stock divi-
dend.
On this point, Mr.. Hankin's
opinion stated:
All of the common stock of Pepco
is owned by the w. R. & E., and
because Of this ownership w. r. e. E.
common stock is quoted on the
market at figures in excess of $3.50
bid and $3.50 asked. If Pepco were
to sell its shares in the open market,
the amount of capital obtainable
would probably be in excess of
SIS ,00O, 900. But it seeks to sell these
shares to w. r. & E. for 5000 900.
In these circumstances, the question
arises whether the commission
would be justified in waving its
competitive bidding rules applicable
to the sale of securities by public
utilities within the District.
There may be a reason for waiv-
ing the competitive bidding rule,
because all Of the common stock
of Pepco is owned by w. r. & E.,
and. therefore. a transfer OF 10000
additional shares would result
merely in the holding of the same
proportionate interest in the assets
and in a contribution by w. r. G E.
of an additional $1,000 900 to Pepco.
But then the question also arises
whether the sale of 10000 shares
to w. r. & E. at 500 share
does not amount to stock dividend
to the extent Of the value of the
shares In excess Of 500. contrary to
paragraph IS of the public utilities
law"
Mr.. Hankin said this paragraph
provides that no public utility shall
declare any stock, bond or scrip
dividend or divide the proceeds Of
the sale Of any stock, bond or
scrip among its stockholders.
IS Specific Questions.
In deferring decision on the pc
tition by Pepco and w. r. & E. for
the proposed stock sale the COM
mission directed its staff to find
answers to IS specific questions in
investigating the ownership and
financial matters as to the power
concern.
These may be paraphrased as fol-
lows:
l. Whether the power company
needs additional capital?
2. What would be the best meth
ods Of financing?
3. How would the proposed
method Of financing, or other
methods, affect the company, the
consumers and the investors?
4. Are there special circumstances
which would warrant the suspension
of the bidding rule?
S. If the competitive bidding rule
be waived would the sale (as pro-
posed constitute a stock dividend?
6. If the competitive bidding rule
is not waived, at what price should
w. r. & E. exercise its pre-emptive
right to buy first any stock offered
by Pepco?
7. When, under what circum-
stances, from whom, in what
amounts and at what prices did
North American either directly or
indirectly or through associated
companies or nominees acquire Sc
curities of w. r. & E. or any other
public utility in the District?
8. In what other manner, if any,
did North American directly or in
directly control any of the public
utilities of the District?
Dividend Question.
9. When, under what circum-
stances, and how much money did
North American receive as dividends
or other payments either directly
or through associated companies or
nominees, from w. R. & E. or any
other District utility concern?-
10. When, under what circum-
stances, to whom, in what amounts
and at what prices did North Amer
ican, directly or otherwise, dispose
of w. R. e. E. or other District
utility securities?
II. What was the legal status of
the acquisitions, interest and divi-
dends received, and the dispositions
referred to in previous questions, in