The Moving picture world (December 1920)

838 MOVING PICTURE WORLD December IS, 19Z0 Wild-Cat Picture Companies Annually Offer $250,000, 000 in Valueless Stock Vigilance Committee Reports on Investigation WORTHLESS stock amounting to more than $250,000,000 is the annual offering of the wild-cat motion picture companies of the country to the American public. This is the estimate of the Vigilance Committee of the National Association of the Motion Picture Industryafter a preliminary survey of three and a half months. The committee has investigated some seventy companies with a total capitalization of about $180,000,000. It believes that when all the new companies of this character launched during the past year are counted, it will be found that their total capitalization will reach . fully $250,000,000. The committee declares that the people of this country have actually bought during the past year between $25,000,000 and $50,000,000 of stock issues, none of which are worth the paper on which the certificates are printed. It should be borne in mind that these figures do not refer to stock issues offered for business expansion by wellestablished companies with big assets and big earning power. W age-earners "Stung" Most of the money invested in wildcat companies has come out of the pockets of small tradesmen, clerks, stenographers, waitresses, bootblacks and other wage-earners struggling with the high living cost problems. Government employes in Washington are declared to have bought considerable stock in one company floated in that city. Persons in straightened circumstances, crediting the extravagant reports of stock salesmen as to the great fortunes made in the movies, have exchanged their Liberty bonds for movie stock certificates which will never pay a cent of dividend. The Vigilance Committee was created last summer by the national association, the membership of which is made up of the well-established producing, distributing and exhibiting companies of the country. Officials of legitimate film producing companies, many of them pioneers in the industry, feel that next to the victims of the wild-cat companies, they are the worst sufferers, because of the ill-repute the operations of fake concerns cast on the whole field. Only two or three of the seventy companies investigated had any assets or proven earning capacity when their stock was offered to the public. Only about half a dozen could boast officers or promoters who had any real experience in any branch of the industry. The committee's investigation disclosed some interesting methods of finance and some pitiable stories of individuals who had put their trust in the tales told by the promoters. The following stories are told: The "Trick" Clause "A motion picture company now struggling with the production of a film play near New York City, spurred up its stock sale in a similar manner. When wage-earners approached by stock salesmen hesitated to invest, the latter promised the prospective stockbuyers engagements at good wages in the production of the company's play. Thus scores of contracts were issued to stock buyers. "When the company began filming, bootblacks, barbers, hotel porters and waitresses — all stockholders, all prospective stars — began flocking to the studio, where they presented their contracts for engagements. Some of them came from places as far distant as Cleveland. When they arrived at the studio, their attention was called to an inconspicuous clause in their contracts stating that it had to be countersigned by the casting director. Brokers Raised Par Value "The stock issue of another picture company organized without any assets was underwritten by a New York banking and brokerage firm, which sublet a block of the stock to another brokerage firm to sell to the public. The par value was $5 a share. The underwriter agreed to pay the company $4 a share, charging 20 per cent, for marketing the stock. The brokers who agreed to sell part of the stock for the underwriter, raised its par value to $10 a share without consulting the company issuing the stock. "But the motion picture company received only $4 a share, as its original contract with the underwriter stipulated. For every share of stock sold, the brokers received $1.50, the underwriter $4.50, and only $4 a share ever got into the treasury of the embryo company. In this instance the cost of selling the stock was actually 150 per cent., one and half times as much as the nominal value of the stock. Have Used the Mails "The brokerage firm, which raised the stock arbitrarily to increase its own commission, has during the past year launched three companies proposing to produce and distribute motion pictures. The.se companies have a total capitalization of $5,600,000. These promoting brokers have actually taken in hundreds of thousands of dollars in cash for stock. They have made some pictures, but have never sold any. Good deal of the stock has been sold on the strength of the promoters' claim that they owned a valuable motion picture contrivance, but thus far they have been unable to secure patent rights on this device. "The committee is able to state definitely that these wild-cat companies have sold millions of dollars' worth of stock through the mails. Whether the companies in question are guilty of technical violation of the laws regulating the use of the mails rests with the post office authorities to whom the committee is ready to turn over all its files." Exploitation Unnecessary December 6, 1920. Editor, Moving Picture World: In answer to your inquiry regarding what exploitation was done by the Capitol Theatre in connection with the phenomenally successful week's run of Douglas Fairbanks' new picture, "The Mark of Zorro," the extraordinary thing is that practically no unusual exploitation was put back of the picture by the Capitol Theatre. As a matter of fact, forty-one twenty-four sheet stands were posted throughout Greater New York. Further than that, nothing was done so far as I know, and I don't believe that the Capitol Theatre spent a penny more than their usual newspaper advertising appropriation. Yet, according to a letter that I received this morning from Mr. Rothapfel, the receipts for the week were $48,103.13 and the attendance was 94,501. This despite the fact that the police had closed off several blocks on Broadway right at the Capitol Theatre corner owing to the collapse of the apartment house on the block above. With kindest personal regards, I am, Yours sincerely, HIRAM ABRAMS.