WELLINGTON NEWS

Hokitika Guardian, 31 July 1929, Page 2

WELLINGTON NEWS

CATERING FOR THE INVESTORS. (Special Correspondent.) WELLINGTON, July 29. Mr M. H. Wynyard, Chairman of the Auckland Harbour Board, in an address to the Commercial Travellers’ Club, said that money was lying idle because the owners of this idle money could not find “ sound schemes ” in which to invest and suggested that the Associated Chambers of Commerce might do useful work in appointing a special committee for the purposes of investigating schemes advanced for investment purposes, and he contended that this would give satisfaction to investors and no doubt open up money for works now being held up 'for lack of confidence on the of the investing public. Mr Wynyard’s scheme has been condemned, and rightly so, as being superfluous and worthless, and so it is. A chamber or committee would be composed of men who would have to give their services voluntarily, and as the best business men would be too busy to attend to such an outside affair it Would be left to to men with less ability to deal with it, and their services are bound to be perfunctory, and therefore worthless, 'ahe scheme has been condemned by the Chairman of the Wellington Stock Exchange, who maintains that companies seeking to be listed have their prospectuses closely examined, but he says nothing about the companies that do not ask to be listed, and there are quite a number of dividend paying concerns that are not on the Stock Exchange lists, and the lists vary in the four centres. Neither the Stock Exchange scrutiny, such •as it is, nor the investigating committee selected from chambers of commerce as suggested by Mr Wynyard is effective and satisfactory to the investors. Mr Wynyard in his remarks indicated that the investor was timid, which is not correct. He is not timid, for he is at all times ready to risk his money on a venture provided he has confidence in the prospects of the concern. Capital and confidence are inseparable, but there must first be confidence before capital will venture out. There are certain classes of investment in which the investor has no confidence and it is very difficult indeed it is practically impossible to obtain capital Ifor such. Industrial, companies, that is concerns which have to employ a large amount of labour will not be supported by investors, and such companies as are quoted on the Stock Exchange do not receive general support. The floating of new companies is an elaborate undertaking, and more companies have been floated in recent years without the assistance of members of the Stock Exchanges and many of those companies are sound concerns, and have been. well: supported by the investing public. But there is no doubt that some investigation is desirable into a new enterprise before investors are asked to subscribe the capital. In recent years a new line of business has been evolved by some enterprising individuals who call themselves “ organising brokers.” . These brokers are apparently responsible 'for the preparation of the prospectus and its circulation. Some of these organisations have a regular staff of share and bond salesmen 'and some engage salesmen of “good address and personality ” to hawk the shares. It is safe to say that the organising brokers make some though not exhaustive inquiry into the enterprise they place on the market. They, like their staffs of share hawkers, are mainly interested in earning commission and are not directly interested in the potentialities of the enterprise. There is another organisation that has come into existence during the past two or three years which is in the way of rendering very valuable services to the investing public. These are the underwriting organisations or companies, and there are several of them in operation now. The services rendered by the underwriters is very important. When they underwrite the shares, bonds or debentures of a company to be floated they guarantee to find any balance otf capital that may not be subscribed by the investing public. There is here a distinctive responsibility and one may be sure that the responsibility is not lightly undertaken. The underwriters make a very close in-vestigation.-through their experts, and when they are satisfied that the undertaking is a reasonably sound proposition they undertake the responsibility. 'An investigation by a Stock Exchange committee or a Chamber of Commerce is of small value, compared with the investigation made by the underwriters: the latter stake their money, the former - stake nothing. A safe though not infallible rule for the investor is to give attention to an underwritten issue and pass the others by. ■