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Ch. 9] MARKETING OF INVESTMENT SECURITIES 429
The Profits o£ Security Selling.—The profits obtained by
the investment banker are sometimes very much exaggerated
and sometimes very much understated. It all depends on the
kind of security dealt in, the ease of sale, and—unfortunately
—the grip the banker has on the corporation. The gross profit
is smallest on the non-taxable bonds of Massachusetts cities
and towns. It is largest on the preferred stocks of small,
local manufacturing enterprises. The difference in gross profit
is extreme. Very frequently the gross profit on a Massachusetts
short serial bond is as low as a half of i per cent, $5
on each thousand-dollar bond; very frequently the gross profit
on the preferred stock of the small industrial is as high as
20 per cent, or $200 for each thousand dollars of par value."
Between these extremes lies most of the investment business.
Seldom, except for advertisement, will a bond house expect to
obtain as low as half a point profit, and few reputable investment
houses care to associate their names with an enterprise
so needful of capital that it must pay twenty points for selling
its securities.
Leaving out the various syndicate and selling commissions,
and restricting our judgment to the total gross profit—that
is, the difference between the price received by the compatiy
and that paid by the public investor—it is possible to reach
certain general averages that are approximately true under
normal conditions.^ In order to refer to the matter in more
than mere guesses the writer has gathered accurate information
covering the gross profit for various classes of securities using
the offerings of a number of investment bankers. For a given
grade of security the gross profit is remarkably uniform for
the different dealers. The figures are drawn from offerings
during the three years preceding the European War and some
0 This does not include the sale of the stocks of highly speculative
enterprises; the marketing of these securities is discussed in the next
chapter.
PThe problem is sometimes complicated by the gift of stock bonuses to
the bankers as part commission. In computing the averages given in the
following table the writer has omitted all such cases. So that the averages
represent actual gross selling profits in money.
Beschrijving voorwerp
| Titel | The financial policy of corporations |
| Auteur | Dewing, Arthur Stone |
| Jaartal | 1926 |
| Collectienaam | NIVRA Historisch Archief, UBVU gedigitaliseerd |
| PPN | 344552586 |
| Toegangsgegevens (URL) | http://imagebase.ubvu.vu.nl/getobj.php?ppn=344552586 |
| Signatuur origineel | NIVRAHA149 |
| Evaluatie |
Beschrijving
| Titel | NIVRAHA149_00453 |
| Transcript | Ch. 9] MARKETING OF INVESTMENT SECURITIES 429 The Profits o£ Security Selling.—The profits obtained by the investment banker are sometimes very much exaggerated and sometimes very much understated. It all depends on the kind of security dealt in, the ease of sale, and—unfortunately —the grip the banker has on the corporation. The gross profit is smallest on the non-taxable bonds of Massachusetts cities and towns. It is largest on the preferred stocks of small, local manufacturing enterprises. The difference in gross profit is extreme. Very frequently the gross profit on a Massachusetts short serial bond is as low as a half of i per cent, $5 on each thousand-dollar bond; very frequently the gross profit on the preferred stock of the small industrial is as high as 20 per cent, or $200 for each thousand dollars of par value." Between these extremes lies most of the investment business. Seldom, except for advertisement, will a bond house expect to obtain as low as half a point profit, and few reputable investment houses care to associate their names with an enterprise so needful of capital that it must pay twenty points for selling its securities. Leaving out the various syndicate and selling commissions, and restricting our judgment to the total gross profit—that is, the difference between the price received by the compatiy and that paid by the public investor—it is possible to reach certain general averages that are approximately true under normal conditions.^ In order to refer to the matter in more than mere guesses the writer has gathered accurate information covering the gross profit for various classes of securities using the offerings of a number of investment bankers. For a given grade of security the gross profit is remarkably uniform for the different dealers. The figures are drawn from offerings during the three years preceding the European War and some 0 This does not include the sale of the stocks of highly speculative enterprises; the marketing of these securities is discussed in the next chapter. PThe problem is sometimes complicated by the gift of stock bonuses to the bankers as part commission. In computing the averages given in the following table the writer has omitted all such cases. So that the averages represent actual gross selling profits in money. |
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