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Page: of 90
—
We know of properties that were
purchased for
$1,000 that have a capitalization of $3,0
00,000. What
chance has the investor for reward for his
investment in
a proposition of this character?
When the promoter, or promoters, of a proposit
ion,
purchase a property and incorporate it they appo
rtion the
capital stock to suit themselves; fix the numb
er of shares
to be issued and the price of the same.
If a dozen properties or claims should Le purc
has <
ina barren zone, where mine ral_ did not
exist, it would
not follow that the parties who purchase
d the prope ‘ty’
for $300 or $500 could not capitalize it’
with as muy
million shares—if they so desired—nor
does it follow
that this pernicious system is not too ofte
n the one en:
ployed.
The promoters of a company can place
whatever capitalization they may desire upon the prop
erty—they can
fix the number of shares of promotio
n stock—keep !alf
for themselves and sell the other half
or distribute it ju-i
as they please.
Every investor should ask himself this
question:
“Does the value of the property repr
esent a property
value behind the share of stock I purc
hase?”
In order to determine whether or
not it does represent such value he can make thes
e deductions for hinself.
If the capitalization of the
company is $1,000,000
and the stock is worth 25 cents
per share—or rather if it
sells for that—in order to have
a property value back: of
the stock the holdings of
the company should be wert
h
$250,000, or one-fourth of
$1,000,000,
In other words, multiply
the price per share by
the
total number of shares,
to get what should be
the basis of
calculation in fixing the
capitalization of a comp
any.
;
In
the above table we have
$1,000 per month or $12,
assumed a net profit of
000 per year.
99
The mine with