VOObyM

Reminiscences of a Stock Operator
syndicate assured the president, or so I was told, that the price would not go below 50. It
would be a very profitable deal as there was big value there.
The promoters' first mistake was in the matter of timeliness. The saturation point for
new stock issues had been reached by the market, and they should have seen it. But even
then they might have made a fair profit after all if they had not tried to duplicate the
unreasonable killings which other promoters had made at the very height of the boom.
Now you must not run away with the notion that Jim Barnes and his associates were
fools or inexperienced kids. They were shrewd men. All of them were familiar with
Wall Street methods and some of them were exceptionally successful stock traders. But
they did rather more than merely overestimate the public's buying capacity. After all,
that capacity was something that they could determine only by actual tests. Where they
erred more expensively was in expecting the bull market to last longer than it did. I
suppose the reason was that these same men had met with such great and particularly
with such quick success that they didn't doubt they'd be all through with the deal before
the bull market turned. They were all well known and had a considerable following
among the professional traders and the wire houses.
The deal was extremely well advertised. The newspapers certainly were generous with
their space. The older concerns were identified with the stove industry of America and
their product was known the world over. It was a patriotic amalgamation and there was a
heap of literature in the daily papers about the world conquests. The markets of Asia,
Africa and South America were as good as cinched.
The directors of the company were all men whose names were familiar to all readers of
the financial pages. The publicity work was so well handled and the promises of
unnamed insiders as to what the price was going to do were so definite and convincing
that a great demand for the new stock was created. The result was that when the books
were closed it was found that the stock which was offered to the public at fifty dollars a
share had been oversubscribed by 25 per cent.
Think of it! The best the promoters should have expected was to succeed in selling the
new stock at that price after weeks of work and after putting up the price to 75 or higher
in order to average 50. At that, it meant an advance of about 100 per cent in the old
prices of the stocks of the constituent companies. That was the crisis and they did not
meet it as it should have been met. It shows you that every business has its own needs.
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