PROMOTING AND FINANCING. if, as is often the case, the promoter organizes a new com pany to take over the various plants which he is intending to combine under one management. or to develop some new patent, it has been the common practice for him to issue stock far be yond the actual cash value of the plants under consideration; then to pay for these plants with as much of the stock of the new company as was necessary to secure them, retaining the bal ance for his own services. In other cases, when the company is organized, the distribution of the stock among the different parties in interest is agreed upon jointly. and the promoter receives a certain percentage of the entire amount as his reward. Inasmuch as he in many eases takes considerable risk, and as the success of the enter prise is practically due largely, if not entirely. to his initiative, it has at times been possible for him to secure for his reward as high as 20 per cent. of the capital of the organization, paid to him in common stock. With such large rewards as are often hoped for and sometimes obtained, it is evident that the interest of the promoter may become a very direct cause for the forma tion of the Trusts, Scarcely less prominent than the promoter in this regard is the financier. When either a new
enterprise is to be started or a combination of existing establishments is to be made, it is usually necessary to raise a considerable amount in cash, in order that the new institution may start with capital in hand. Frequently also many of the plants purchased need to be paid for in cash. The stock of the new company is ordinarily the source from which it is desired that such cash should come. Inasmuch, how ever, as the general public is not likely to take the stock immediately and pay for it in cash, it is desirable that some one be found who will underwrite it, that is to say, who will take the stock and agree to furnish in exchange therefor an agreed-upon sum in cash at a certain fixed date in the future. For this service, so specula tive in its nature, the financier ordinarily de mands and frequently receives very high com pensation. In certain instances, which were cited before the United States Industrial Com mission. for each $100,000 in cash furnished, the promoter received $150,000 in common stock. while the underwriter, the capitalist, received $150,000 of common stock, and in addition thereto $100,000 in preferred.