3. Corners in stock.—Corners may be divided into two classes, those that merely occur thru force of cir cumstances, without personal contrivance, and those that are the result of personally directed manipula tion. A group of individuals may find to their sur prise that they control the whole supply of a certain stock at 'a given time, and realizing the power which this situation gives them, attempt to utilize it. Some times this power falls into the hands of an individual. In either case the event occurs without the conse quences having been foreseen. Most corners, how ever, are the result of definitely planned speculation, the promoter or promoters intending to profit by the unique position of the debtors, whom they have forced into an embarrassing situation.
4. Northern Pacific panic.—The most famous case of an accidental corner was that in Northern Pacific stock, in May, 1901. Two opposing parties of very powerful capitalists sought control of this road, and began secretly to buy up the stock. The price rose by leaps and bounds; professional speculators, not aware of the cause and believing the price to be far above the intrinsic value of the stock, sold short. The thousands of shares thus called out were of course eagerly snapped up by the contending syndicates. When the shorts endeavored to cover, they found that there was practically no stock available on the market. The supply had been exhausted by the greedy demand of the rival syndicates. The shorts, in their efforts to cover, bid the stock up until it finally reached $1,000 per share.
Altho contending parties agreed to lend out enough stock to prevent a panic, they forced the shorts to pay heavily—about $300 a share. This price however, considering the fact that the shorts were cornered, was not exorbitant.
5. Harlem corner.—One of the most famous corners which was ever deliberately planned was that worked by Cornelius Vanderbilt in the case of the Harlem Railway stock. When Vanderbilt originally bought this stock he paid only $8 or $9, for each $50 share. By hard work and good management he so improved the road that the value of the stock jumped to $58 a share. After having thus effectively established the credit of his property, Vanderbilt decided to extend his system. As soon as he applied to the Common Council of New York City for the franchises neces sary to carry thru these improvements, the public learned what was going on. Nevertheless, the fran chises were eventually secured.
In the meantime because of the general knowledge of the advantages that would accrue to the road the price of stock advanced until it reached 117. The political interests which had been instrumental in se curing the franchises for the railroad profited by this rise, having bought stock in anticipation of the event.
They were not satisfied with their profit, however, but decided that there was another splendid opportunity awaiting them. Their asset was the complete control of a council that would do their bidding. They planned to sell the stock of the Harlem Railway short, at the high price then prevailing, and after this had been done, to have the council revoke the franchise which had been granted, an act that would cause consternation among the holders of the stock of the company, and a consequent heavy fall in its price. As soon as this occurred the politicians would go into the market and buy up the securities necessary to cover their short sales.
But somehow, Mr. Vanderbilt secured a knowledge of this scheme. He at once decided not only to block the move but to profit by the incident. All of the stock which the politicians sold short he purchased, so that ultimately he held options from the political syndicate for more than the total issue of the Harlem stock. He thus forced his enemies into a position where they promised to deliver more Harlem stock than was in existence. 3 I r . Vanderbilt had succeeded well in his venture. He simply waited until the op tions matured. When the time for delivery came the politicians endeavored to secure the shares, there were none obtainable in the market. The price of Harlem stock in the meantime had dropped to about 72. As soon as the political schemers discovered their predica ment they began to buy stock at any price. Quota tions advanced by leaps and bounds, until they finally reached 179. Here the price remained. Mr. Van derbilt then disclosed to his rivals the full extent of their position. He dictated the terms on which he would settle the regranting of the franchise and a settlement at the figure then prevailing. The syn dicate had no choice but to accept his terms.
The politicians, smarting under the costly defeat, cherished the hope that they might avenge themselves upon Vanderbilt. A short time later he secured con trol of the Hudson River Railroad and immediately set about preparations to consolidate this road with the Harlem. The politicians argued that Vanderbilt would take advantage of the opportunity to make money thru the rise in the price of the stock—a rise which seemed almost inevitable because of the ad vantages of a united property. It occurred to them that here would be a splendid opportunity to retaliate for that first corner in Harlem, which had been so dis astrous to them. They consequently resolved, to sell Hudson stock short and then, thru manipulation of the legislature, to balk Vanderbilt's scheme by refus ing the necessary permission for the consolidation of the property.