WELLINGTON NEWS

Hokitika Guardian, 21 October 1929, Page 3

WELLINGTON NEWS

JOINT STOCK COMPANIES., ; (Special Correspondent ) WELLINGTON, October -18. During the week conferences of two important organisations were held inAuckland, and these were the Associated Chambers of Commerce and the Stock Exchange Association of. ,Npw Zealand, and. by a singular coincidence both bodies held their conference's on the same days, -and both had a good deal to say about - the: 'Companies’ Act, 1908. Both associations desired the Act amended and .brought up to date, and they are fully "justified , in that. In the twenty-one years that the Act has been in operation many changes have occurred in company flotation, company organisation, and company management, and the Act required amending to meet the changed conditions. But apart from this we have to recognise that in the past five years a greater number of people aie trading in the shares of joint stock companies, or are helping in the formation of new concerns. Phis is the natural result of the spread of economic information- and knowledge. FurtlieiTnore industrial development is now a large scale affair, and it is only by co-operation of a number of capitalists large and small (that the new system is possible. It sepms also that we have gone further, in the. matter lor even -the . eopipgn.y..must .cofqperate. With bthers., - The tendency ' is, towqrd.s copipanies amalgamating, joining Hike -> like, and producing in ..mass and -ultivating: in-.- n>ass • consumption.. Whether the new system is good or bad, wise or- unwise,; is .■•. beside ,; :the hoi n't, the now system exists and (has to be faced, i. - "i yA ■ • : In New Zealand -one of, the most re-

markable developments; olf tjie. ,-jpast few years .has been -the, increasing, al;tention- paid by the small investors to share dealings. And this lias expanded to such an extent that the supply of Stock Exchange securities which are reasonably safe enough for the small investor to buy, H small, with the consequence that keen competition of investors among themselves has forced up prices of the better company shares, and the income return from most of such concerns is absurdly small. Another development, and one tlmi is quite natural, is the mushroom growth of company promoters. The fatter sie that there is a 1 demand for shares, jthat the’ demand is growing' and that the supply is short'of tlie demand/and they think they can meet the demand by forming “Small corhrqnies.. There appears.!.now;-to- be/a mass movement ifr- that direction and iduring the next- six months, which constitute the Dominion’s' profit-taking-, period, quite a number- of new fkl:ations will'-be undertaken.- Some of them have 1 already-made;'their appearance, but whether they will all merit the support of the investors is questionable. But there avert no means or methods of pladlhg art• embargo on-the “ diid ” flotations, and it is doubtful whether legislation will' accomplish this. : Nevertheless the. Companies’ Act ..requires to ' he .'modernised for there qre quite' a "'number of matters that have since- developed that requiie recognition and regulation. The main grievance of the Stock Exchange Association is .that shares in these new companies are hawked about by share ..salesmen and ..it is urged that investors . should . cominunicate with. a. member of the'Stock Exchange before i applying forshares ill com-, panjesi of which they Have had.no ptevigus reliable information. This is all very well, but wliat information-is one likely to get from a sharebroker who probably knows just as little as the investor applying , for information. The share hawker is perhaps npt, a desirable person, especially when he is vending the shares of a new company that has little chance of success, but he is a necessary evil, if one may say so. Most if not all the companies on the Stock Exchange list owe their origin to the share, is just as necessary, to canvass to-day fis it was in -years .gone, by,•.. It i? the flotation of .ponperns .that needs to he, watched, and perhaps that can be done to; some extent...by, insisting that all companies appealing.,tc the public for capital t sliall ,i;egistei with >he Stock Exchange, according, tc Stock Exchange rules,, this of course must be optional, hut investors woulc soon learn to discriminate. A concern that announces ,in jts prospectus : thal -it .will register . with sie ; .sh<ock Exchange would be more favourably re ceiveel by the public than one whicl refused to do so. . The small investor it is assumec wants immediate income from his in

vestment, and if that is the case, he would be very unwise to take up shares in a new company be it ever so good, because a new concern cannot hope to he making profits from the start. The small investor would do better by taking up the debentures of sound concerns yielding a fixed rate of interest". There is no anxiety or trouble about such a, security, but with shares it is quite different and an investor niay lose money more easily than, he can make it. Even with the shares of •established companies it is not easy to make money,, , ' .