$18,000,000, although as the contract was made with each establishment separately, and as each one of the options was a purely private matter between the promoter and the person selling, it was not publicly known exactly what sum was agreed upon for the value of each separate plant.

It was understood that in most cases the choice was given to each company to receive for its plants either cash or preferred stock, of which the par value should be an equal amount with that of the cash option, together with a like amount of common stock as a bonus. In this way it was supposed that about $18,000,000 of preferred stock and the same amount of common stock were issued, as against the properties and cash, whereas $10,000,000 more of common stock went to the promoter to pay him for his services and for all of the expenses of getting the organization together. It was, of course, necessary that organization fees, lawyers' fees, etc., be paid. It was also probably true that in order to raise the necessary cash certain commissions had to be paid to bankers and others who advanced it. It might have been also true that, instead of the pre

ferred and common stock being taken on the terms suggested before, better terms in certain instances had to be given, and it is even possible that in other instances less favorable terms may have been accepted. Inasmuch, however, as at the time that the company was organized one share of preferred and one share of common stock together sold for considerably more than $100, it seems fair to assume that the promoter had the opportunity of making very large profits indeed out of the $10,000,000 in common stock assigned him for covering the cost of formation and for his pay for services rendered. It will be noted that aside from this $10,000,000, he had the opportunity of making much more if he could make close enough bargains with those who entered into the organization so as to buy their plants at less than the $18,000,000, which seems to have been generally agreed upon as the value of the plants with the cash capital; whereas, on the other hand, if he could not secure them for that sum, his profits would be correspondingly diminished.

With the promoter ordinarily works the "financier" or the underwriter. If the com

pany is to be a success, it is necessary that the stock be sold in order that the needed capital in the form of either plants or cash, or both, be secured to carry on the business. Private bankers are ordinarily chosen to negotiate the sale of stocks and bonds, and very frequently they are persuaded also for a consideration more or less large to underwrite the stock. By this (( underwriting" is ordinarily meant an agreement to secure the sale, at a named price, of a certain amount of the stock of the company. If persons not connected with the company or the banker concerned purchase all of the stock under the agreement at a price as high as that named in the contract, the banker has no further responsibility. If, on the other hand, all has not been sold at the time agreed upon, the banker takes the remainder at the rate mentioned and furnishes the cash to pay for it. In that case, his profits or losses will depend upon the price at which he may be able thereafter to sell the stock; or in case he holds it, upon the dividends that may be paid by the company in its regular course of business. is commonly believed that the sums asked by the underwriter are as high or higher than those

It

of the promoter. A banker agreeing to furnish millions of dollars to a company in order to enable it to enter upon a line of business in the way in which its promoters prefer, often takes, of course, considerable risk, and will wish corresponding pay. The pay of the underwriters in the organization of the Standard Distilling and Distributing Company has already been noted. High officers in some of the industrial combinations have stated that the cost of organization, including the pay of the promoter and financier, amounts often to from 20 to 40 per cent. of the total amount of stock issued, dividends having therefore, if possible, to be paid upon this amount of stock at least in addition to that which represents the cost value of the plants or the amounts paid for them.

Not infrequently the work of the financier and that of the promoter are combined, the profits depending upon the terms at which the stocks are bought and sold. The case of the Distilling Company of America is one in point. Its authorized capital is $55,000,000 of 7 per cent. cumulative preferred stock, and $70,000,ooo of common stock. Of this total sum, $31,250,000 of preferred stock and $46,250,

The

000 of common stock were put into the hands of the organizers or promoters of the combination for the purpose of bringing about the organization. The company was incorporated to purchase and hold the stocks of four existing companies, each in itself a combination, and to secure control of certain rye distilleries. organizers or promoters were to use the stocks placed in their hands to exchange in certain named proportions for the entire stock of each of the existing combinations, to furnish also $1,500,000 in cash for working capital, and to buy two rye distilleries owned by the Hannis Distilling Company and a rye distillery in St. Paul. A large proportion of the stocks of these different companies were as a matter of fact secured, considerably more than 90 per cent. in each case. It was testified that the rye distilleries cost some $2,000,000. If the entire stocks of all of the four companies had been exchanged at the rates agreed upon, there would have remained in the hands of the organizers $10,710,000 of preferred and $13,360,000 of common stock, for which they were to secure the $3,500,000 needed for purchasing the rye distilleries and furnishing the $1,500,000 to be used for work