Business & Finance: Stockholders Annihilated

Reorganization of railroads that went bankrupt before the war boom started is going to be just as drastic as if the war boom had not happened. Such was the gist of an ICC decision last week. With only minor changes it approved the New York, New Haven & Hartford reorganization plan, slashing capitalization from $475,000,000 to $365,000,000. The drastic part of this decision was that the reorganization completely wipes out the old stockholders, although in the first eight months of this year net profits totaled $11,350,000 —$5.77 a common share.

The frail hopes of New Haven shareholders promptly withered. The price of New Haven common fell 50% overnight. Professional speculators took ICC at its word, with the result that Wall Street saw some strange phenomena: Chicago, Rock Island & Pacific 6% preferred with eight months’ earnings of $20.43 a share sold for 75¢; St. Louis Southwestern common with earnings of $19.69 a share hung around $4 (bid); Missouri Pacific with earnings of $19.06 a share sold for 10¢.

But ICC knows that railroad earnings today are strictly wartime profits, wants the railroads reorganized on a commonsense, peacetime profit basis.