Full Text Archive

Full Text Archive
https://www.fulltextarchive.com
manipulations, and particularly his actual control of the Seventeenth and Nineteenth Street line.
Through an advance to him, on deposit, made in his bank by Stener at a time when the stock of
the Seventeenth and Nineteenth Street line was at a low ebb, he had managed to pick up fifty-
one per cent. of the stock for himself and Stener, by virtue of which he was able to do as he
pleased with the road. To accomplish this, however, he had resorted to some very "peculiar"
methods, as they afterward came to be termed in financial circles, to get this stock at his own
valuation. Through agents he caused suits for damages to be brought against the company for
non-payment of interest due. A little stock in the hands of a hireling, a request made to a court
of record to examine the books of the company in order to determine whether a receivership
were not advisable, a simultaneous attack in the stock market, selling at three, five, seven, and
ten points off, brought the frightened stockholders into the market with their holdings. The banks
considered the line a poor risk, and called their loans in connection with it. His father's bank had
made one loan to one of the principal stockholders, and that was promptly called, of course.
Then, through an agent, the several heaviest shareholders were approached and an offer was
made to help them out. The stocks would be taken off their hands at forty. They had not really
been able to discover the source of all their woes; and they imagined that the road was in bad
condition, which it was not. Better let it go. The money was immediately forthcoming, and
Cowperwood and Stener jointly controlled fifty-one per cent. But, as in the case of the North
Pennsylvania line, Cowperwood had been quietly buying all of the small minority holdings, so
that he had in reality fifty-one per cent. of the stock, and Stener twenty-five per cent. more.
This intoxicated him, for immediately he saw the opportunity of fulfilling his long-contemplated
dream--that of reorganizing the company in conjunction with the North Pennsylvania line,
issuing three shares where one had been before and after unloading all but a control on the
general public, using the money secured to buy into other lines which were to be boomed and
sold in the same way. In short, he was one of those early, daring manipulators who later were to
seize upon other and ever larger phases of American natural development for their own
aggrandizement.
In connection with this first consolidation, his plan was to spread rumors of the coming
consolidation of the two lines, to appeal to the legislature for privileges of extension, to get up
an arresting prospectus and later annual reports, and to boom the stock on the stock exchange
as much as his swelling resources would permit. The trouble is that when you are trying to make
a market for a stock--to unload a large issue such as his was (over five hundred thousand
dollars' worth)--while retaining five hundred thousand for yourself, it requires large capital to
handle it. The owner in these cases is compelled not only to go on the market and do much
fictitious buying, thus creating a fictitious demand, but once this fictitious demand has deceived
the public and he has been able to unload a considerable quantity of his wares, he is, unless he
rids himself of all his stock, compelled to stand behind it. If, for instance, he sold five thousand
shares, as was done in this instance, and retained five thousand, he must see that the public
price of the outstanding five thousand shares did not fall below a certain point, because the
value of his private shares would fall with it. And if, as is almost always the case, the private
shares had been hypothecated with banks and trust companies for money wherewith to conduct
other enterprises, the falling of their value in the open market merely meant that the banks
would call for large margins to protect their loans or call their loans entirely. This meant that his
work was a failure, and he might readily fail. He was already conducting one such difficult
campaign in connection with this city-loan deal, the price of which varied from day to day, and
which he was only too anxious to have vary, for in the main he profited by these changes.
98 / 312

---