WELLINGTON NEWS

Hokitika Guardian, 26 November 1929, Page 5

WELLINGTON NEWS

INVESTORS’ SAFEG CARDS

(Special Correspondent )

'WELLINGTON, Nov. 25

Alter a very long peri (I ol' speculative activity the New York .Stock Exchange lias sobered, clown, anil dealings now are normal, but prices still have a habit of rising sharply. That the niar- ' ket has regained sanity is poor consolation to the thousands of loolish speculators who have lost heavily. Call money is now down to -U per cent, while a few weeks ago 7, 8 and 9 percent. were readily and freely paid. New York seemed to have set the pace for stock exchanges and bourses in other countries'at all events there have been crashes, hut on a minor scale, in London, Berlin, Paris, Amesterdam .and in a mild way in Australia. This seems to establish a sympathetic movement, and it is a peculiar thing that activity on ail exchange soon spreads to others, for investors or speculators, whatever one chooses to call them, follow the leader like merino sheep. Active speculation on the .stock exchanges is a tip for the promoter to get busy, and he is quick off the mark and creates a boom for new shares. Dealing with what it terms “the new issue booni,’’ the London “Investors’ Review” of Oct. sth. publishes a list of GO companies which have suffered serious declension in share values. The issued share capital of these companies was £2GJ3IB,OCO, and the height of the noon} they reached a valuation of £07,827,000, These shares now represent only £12,120,000, so that there has been a decline in market value of £.55,» 600,000, Five of the companies whose issued capital was £2,000,000, have gone into liquidation. The “Investors’ Review” contends that many of the shares 'in the 60 companies in the list were raised to fictitious values by fraudulent pretences and evasion of the British Companies’ Act.. The prime responsibility, it is said, rested on the Board of Trade for allowing the Companies'’ Act to be set at open defiance, and the Stock Exchange is blamed for not taking steps to prevent fraud. It is. the .investor who has suffered, and liis successor at the game will suffer. It is so difficult to safeguard. the investor and prevent him throwing his money into the maws of financial sharks.

Company flotation is rather difficult in London just now,'and borifowiiig by Dominion or foreign . Governments is being discouraged because of the difficult monetary situation, but that is only a temporary matter. Company flotation in Australia is a difficult matter just now because of the stringency of the money market, and similar difficulties should be apparent in New Zealand, yet promoters have seized upon i..e present time, for appealing to the investors to take up shares. Perhaps visions of milk cheques, wool cheques and fat stock cheques have given the promoters a false view.Of the position. In the opinion of those closely associated with finance,, a more inopportune time could not have been chosen by the promoters,; hut, that is their concern. It is the investor, • and the smaller investor In particular that one would like to see safeguarded or put wise to dealing with a prospectus.

At the present time-there are three or four concerns before the public whose merits or demerits are not under consideration by the writer. The best plan for the investor to adopt is to regard all the platitudes and boosting paragraphs in' the prospectus and in newspapers that carry the abridged prospectus as an advertisement. The investor should admit to himself that the proposed company lias many good points about it all bi which have been thrust under his nose by the promoter. There is ho aeed to worry over the merits but the investor should set to work to find out the defects or bad points. There are some simple but obvious questions which the investor should seek to have answered fully and satisfactorily. The first question to be asked is «j s there room for the company in the present economic structure of the Dominion?” Because this question waß overlooked freezing companies, woollen and other companies were planted all over the country and investors had to write off losses. Assuming that the company has a niche to fill, then the next question is “Are the nien in control capable of managing the affairs of the company honestly, intelligently and efficientlv?” What are the provisional .direct,ovs. promoters and others getting out of the concern? There is a saying in stock exchange circles that promoters and others who get the first cut in the promotion are the First, robbers.” Of course the expression is technical and must not be misunderstood. Then there is the question whether the' capital is sufficient for the proposed business, and several other pertinent -points on which the investor should be satisfied. W eigh up the concern by placing its good points against the bad and be guideu by results.