The Making of America Volume . 3 (Paperback)

This historic book may have numerous typos and missing text. Purchasers can download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1905 Excerpt: ...may have gone into the scheme on his own account. Out of the $250,000 which he realizes by the sale of stock, the promoter pays $100,000 for the land, $75,000 for development and working capital, and either puts the $75,000 remaining into his own pocket or divides it with the financial interests who have assisted him by advances. The foregoing represents a typical promotion. Similar enterprises are constantly being floated throughout the country, not only on mines, but on real estate, manufacturing enterprises, on patents, water power, irrigation, timber and a great variety of resources. The details of each may vary from the form presented, but the essential principles are the same: (1) the securing of a right to purchase an opportunity to make money; (2) the capitalization of that opportunity at a higher figure than the price to be paid the original owner plus the funds required for development; and (3) the sale of this capitalization to the investor either directly or through the agency of middlemen for a sum of money exceeding the amount necessary to purchase and develop the resource which it is intended to exploit. This difference represents the promoter's profit, the characteristic feature of corporation financiering. What now has the promoter done to entitle him to this large profit? He has produced no coal; that is done by the company to which he turns over his options. Neither has he risked an amount of money in any way comparable to the profit which he has made. To obtain fifty options under the circumstances described may not have required an outlay of more than $5,000, and this is an outside figure. Judged by the canons of what is generally considered to be legitimate money making, the promoter has done nothing to entitle him to the $75,000 profi...