MAIN CAUSE OF LOSSES.
There are, of course, many other points which should be taken into consideration when studying a prospectus, and with some of these I shall hope to deal on a future occasion, but at the moment I want to refer to what I Consider is the greatest aid to the unscrupulous Company promoter, .namely, the greed of many persons for securing omething for nothing. When the public learns that (Continued on page 564)
Finance—Public and Private
(Continued from page 563.) this or that loan, perhaps for quite a large .amount,. has been applied for many times over, it is apt to suppose— and the stunt Press too often supports the idea—that an almost unlimited amount of capital is available for investment purposes. As a matter of fact probably only a small portion of the applications represent genuine investment, the bulk of the applications being made by those who hope as soon as the allotment letters are issued to be able to. sell at a premium. To such an extent does this practice prevail that during times of ." bOorn " it is no_ -uncommon thing for a prospectus to make its appearance where nearly all the considerations I have enumerated above are violated and where it is quite plain that the venture is an undesirable one. If, however, by reason of the tendencies of the public at the moment there is a prospect bf the shares comnianding a premium, the issue will probably be over-subscribed many times. The allotment letters are issued, the premium hunter takes his profit, and the public; which has been attracted by the apparent demand for the shares and hopeS that the premium will go still higher, is left with a shareholding of a thoroughly undesirable character. This promotion, however, has been rendered possible by the greed of a certain section of the public and the hope on the part of the premium hunter that at all events he will not be landed with the shares but will be able to secure the . premium in time from some more ignorant individual.
Indeed, this keenness to make easy fortunes by speculation is responsible for most of those booms which furnish the ideal opportunity for the Com- pany promoter of undesirable ventures. There arc, of course, genuine booms in markets resulting, perhaps, from some sudden turn in the fortunes of an industry, the discovery of a valuable gold reef in a mine, or the sudden introduction of some new and immediately popular industry, but the point is that the eagerness of the public to obtain easy profits from buying shares in the hope that they will not be the ones called upon to " hold the baby " is usually responsible for the mad heights to which shares are finally rushed before the collapse comes. Briefly, therefore, and . regard- ing the public in the mass rather than individually, the real remedy and protection for the investor is to be found in a genuine desire on the part of the public not for speculative profits, but for an assured income
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