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Reminiscences of a Stock Operator
pouring into this country from Europe and the banks had to find ways of impounding it.
The way business was done might have been regarded with misgivings by the old, but
there didn't seem to be so many of them about. The fashion for gray-haired presidents of
banks was all very well in tranquil times, but youth was the chief qualification in these
strenuous times. The banks certainly did make enormous profits.
Jim Barnes and his associates, enjoying the friendship and confidence of the youthful
president of the Marshall National Bank, decided to consolidate three well-known stove
companies and sell the stock of the new company to the public that for months had been
buying any old thing in the way of engraved stock certificates.
One trouble was that the stove business was so prosperous that all three companies were
actually earning dividends on their common stock for the first time in their history. Their
principal stockholders did not wish to part with the control. There was a good market for
their stocks on the Curb; and they had sold as much as they cared to part with and they
were content with things as they were. Their individual capitalisation was too small to
justify big market movements, and that is where Jim Barnes' firm came in. It pointed out
that the consolidated company must be big enough to list on the Stock Exchange, where
the new shares could be made more valuable than the old ones. It is an old device in
Wall Street to change the colour of the certificates in order to make them more valuable.
Say a stock ceases to be easily vendible at par. Well, sometimes by quadrupling the
stock you may make the new shares sell at 30 or 35. This is equivalent to 120 or 140 for
the old stock a figure it never could have reached.
It seems that Barnes and his associates succeeded in inducing some of their friends who
held speculatively some blocks of Gray Stove Company a large concern to come into the
consolidation on the basis of four shares of Consolidated for each share of Gray. Then
the Midland and the Western followed their big sister and came in on the basis of share
for share. Theirs had been quoted on the Curb at around 25 to 30, and the Gray, which
was better known and paid dividends, hung around 125.
In order to raise the money to buy out those holders who insisted upon selling for cash,
and also to provide additional working capital for improvements and promotion
expenses, it became necessary to raise a few millions. So Barnes saw the president of his
bank, who kindly lent his syndicate three million five hundred thousand dollars. The
collateral was one hundred thousand shares of the newly organised corporation. The
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