It seems rather the better practice, how ever, to allow the full length of time an nounced. Many people who want to sub scribe may interpret the announcement that the books will be closed by the stated time as meaning that they will remain open till that time, and some regular clients of the house may be among that number. The house is at full liberty to prefer its own regu lar clients in making an allotment of the securities. Subscriptions of such a charac ter that the house would favor them may be late in coming in. The extra work involved in handling an actual large oversubscription hardly offsets the various reasons for keep ing the subscription book open.
Of course it is undesirable, from the mar ket point of view, that an impression should get out that the offering was not wholly suc cessful. Undoubtedly banking houses often announce that an issue was fully subscribed for or oversubscribed, when that is, at best, only technically the case. Some subsidiary organization of the banking house may have put in a "subscription" large enough to pro vide for the amount not really, as well as technically, subscribed for; or another joint account may have been formed to "sub scribe" for and take over the bonds. Since the possible use of such subterfuges is well known in the street, an announcement of an oversubscription is likely to be taken with a grain of salt unless there is corroborative evidence. The future conduct of the mar ket, the course of prices in the particular security, may indicate that the announce ment is really true. On the other hand, if the original offering house, or even another house, appears to be offering the bonds in substantial amounts or with a degree of con tinuity, people in the street surmise that the oversubscription announcement may have been made with a mental reservation.
Such a formal advertisement for sub scriptions is more likely to be made of the larger than of the smaller issues. In the case of most issues the banking houses are more likely to advertise the issue for sale without stating formally that subscriptions will be received and the books closed at a definite time. If the house advertises that the books will be closed at a certain time, it draws attention to that time and causes an expec tation that it will make some announcement of the favor with which the issue is received.
In the event that investors do not fully take up the issue the banking house faces the dilemma of being obliged to resort to some subterfuge, or of having emphasized the lack of the complete immediate success of the issue. If it simply advertises the securities for sale, it can announce that they have all been sold; if the public fails to take all the securities at once, it does not have to say anything. When the banking house takes the position of an underwriter to the issu ing corporation, it offers the securities for sale on behalf of the corporation. The trans action will need to take the form of a sub scription, with bankers bound to take up and pay for any part of the issue remaining un sold. Often, especially in the case of small issues, the banking house does not advertise the issue in the public press at all.
After the banking house has presented its advertisement in the public press, and the "public" has failed to purChase all of the securities, the house faces the second and difficult part of its selling problem. It must dispose of the rest of the issue by the much slower process of convincing capitalists, not in the mass but one at a time, of the merits of the security and that it is a good bargain at the price. It will do this largely through the efforts of its salesmen. Probably Jay Cooke first showed the power of salesmen in the marketing of securities. He succeeded, by the use of salesmen and extensive adver tising in other ways, in raising the large sums required by the North for the Civil War. Cooke's salesmen did not form part of a distinct profession like that of the se curities salesmen of to-day. It did not re quire a wide comparative knowledge of securities and of financial conditions and methods to offer bonds of the United States Government. The selling of Civil War is sues was a big canvassing campaign con ducted in much the same way and by much the same kind of people as book canvass ing. It demonstrated, however, that personal contact is as powerful in the selling of securi ties as in any other kind of selling. Though the modern investment banking house with its force of salesmen did not develop at once as a result of Jay Cooke's example, the men who now go out to meet the capitalist in his office have formed a well-recognized class for a generation.