THE "DOUBLE-CROSSING" OF RAWHIDE COALITION
At the close of the day's business on December 7th, our brokers, a single firm, members of the New York Stock Exchange, reported the purchase of 17,100 shares in the open market at an average price of about $1.39, and the sale of 1,800 shares at a little above this average. For the first time in the campaign there appeared to be selling pressure. We had quit "long" 15,300 shares. The sum of $21,000 in cash was required to pay for the "long" stock.
On December 8th, the day following, the same firm of brokers reported that they had purchased 17,800 shares at an average price of $1.37½, and the sale of 12,800 shares at an average price of $1.40—"long" on the day 5,000 shares.
On December 9th our purchases through this firm aggregated 16,800 shares at an average price of $1.40, while our sales totalled only 6,400 shares at a slight advance.
Nat. C. Goodwin & Company were now "long" on the three days' transactions 30,700 shares and had been called upon to throw $43,000 behind the market to hold it. This was a comparatively small load to carry and did not alarm us. We considered the stock worth the money. We were curious, however, to learn the reason for the selling.
Nat. C. Goodwin & Company had placed most of the outstanding stock direct from Reno with the investing public at from 25 cents to $1 per share, and early buyers were reaping a harvest. But this did not appear to be the explanation for all of the selling. Interest in the stock was now widespread. There was free public buying and for every actual profit-taker there appeared to be a new purchaser. Apparently, somebody was selling the stock "short."
Late that night a member of our brokerage firm which had been executing our supporting orders, called on me at my apartment. I inquired of him what protective orders he thought the stock would need the next morning to guard against professional attack. He replied:
"I think if you will give us a buying order for 5,000 shares at $1.35 there will be no difficulty."
My understanding was that he wanted to handle the market for me the next morning and that he would, of course, give me quick notice if further supporting orders were needed.
The order was given. It was a very ordinary precaution, for there is hardly a stock on the list that would not be raided by professionals if supporting orders were not known to be in the market. As Saturday is only a short two hours' session, I really fell in with the idea.
Retiring late that night, I left a call for 11 A.M. Next morning at about 10:45 I was awakened by my valet. He said Nat. C. Goodwin wanted me on the long distance. Mr. Goodwin was in Cincinnati, where he was playing a week's engagement.
"Hello," said Mr. Goodwin. "Did they get you? Shall I wire the Knickerbocker Trust Company to pay you $25,000 to support the market? Reported here they have you in a hole."
"What's up?" I inquired.
"Why, brokers here say the stock broke to 60 cents on the Curb soon after the opening," he said. This was news to me.
"I do not need more money," I answered. "I have been asleep. Our brokers have been on the job. I will see what is doing and let you know in a little while. Don't worry." And I rang off.
I 'phoned our brokers and they reported that they had bought 5,000 shares of stock at $1.35 at the opening and had withdrawn support. "Too much stock was pressing for sale," they said.
"This is hell. You should not have permitted the market to break that way. Support the stock!" I said. "Buy 7,500 shares at the market!"
In a few moments this firm of brokers reported that they had rallied the market to $1.16. The recovery was only temporary, however. Another drive broke the stock to 60 cents.
Our brokers had bought 7,000 shares at from $1 to $1.16 and then stopped. The member of their firm who had been handling our orders throughout this campaign said the purchase of this fresh block of stock exhausted our cash balance on deposit with his firm. They had a number of drafts out for collection, attached to stocks sold to Western brokers, that had not yet been credited to us. There was also a big block of Coalition stock due us from them. This was the stock they had bought on our supporting orders. They refused, however, to consider either the drafts or the stocks as a credit.
We had cash on deposit and credit with a number of other brokers. I promptly telephoned several of them to buy large blocks of the stock at a limit of 95 cents. This was 35 points above the quotation that was given me. Not a single share was reported bought on these orders.
I jumped into a taxi and rode to the office of the brokers who had been handling our orders.
The situation was critical. I realized fully that a sharp break of this character in the market price of a stock that had been so widely exploited must prove shocking to investors. I feared that public confidence would be shattered completely.
"This is an outrage!" I protested. "Buy 5,000 shares at 95!" I tendered five $1,000-bills as payment in advance.
It was five minutes to twelve when I gave the order. At noon they reported that they had purchased 2,000 shares, for which I gave them the money. The market closed 95 bid for a "wagon load."
On the face of things it appeared that the market had rallied from 60 to 95 on the purchase of 2,000 shares. This was another convincer that there must somewhere be much that was rotten about the play.
Investigation satisfied me that I had been "double crossed."
The one firm of brokers, members of the New York Stock Exchange, who had been handling our orders, had acted as our clearing-house, holding our stocks and our money. They had an advantage, which stock brokers understand well. Having executed most of our supporting orders, their agents on the Curb were also in a position accurately to judge the professional and lay speculation pulse. It was easy for somebody to "put one over" on us.
Shortly after noon I learned that Hayden, Stone & Company's engineer had turned down the proposition of advancing $1,000,000 for railroad and mill construction. A sufficient tonnage of ore had not been blocked out in the mine. Beyond a question this information was in the possession of brokers early in the day.
While I slept damage had been done to the market that was irreparable. By the time the price hit $1 on the way down trading had reached huge proportions. One clique of Curb brokers were reported to have been persistent sellers throughout. Their identity made it very plain that the double-crossing process had been employed to a fare-you-well.
I accused our broker of not protecting our interests—the interests of stockholders. I raised a howl. He telegraphed another member of his firm who was away on a hunting-trip, to come back to town. Next night both of these men, Nat. C. Goodwin and myself met in my apartments behind closed doors. Their firm agreed to charge to their own account 3,000 of the 5,000 shares reported purchased for us at $1.35. Some other minor concessions were made.
On the day after the "break" New York newspapers reeked with sensational flubdub about the causes of the smash in the price of the stock. In the preceding few months not less than a dozen other securities had "busted" wide open at various times on the New York Curb and New York Stock Exchange, but Stock Exchange houses were sponsors for these and the newspaper kept mum. Never on these occasions was there a hint in the newspapers that possibly somebody had separated the public from its money.
Nat. C. Goodwin and I were wrongfully accused of willfully smashing the market to shake the public out. The New York Sun printed an account of the "break" on the front page, top of last column. It began in a strain that indicated to confiding readers that chorus girls had lost their savings through the recommendations of Mr. Goodwin.
The Sun printed the list of officers of the Rawhide Coalition Mines Company and emphasized the fact that I "of Sullivan Trust Company fame" was second vice-president.
The Sun made no mention of the "double cross." Nor did any of the other newspapers, with the exception of one.
The New York Tribune said:
A Stock Exchange house which has been putting out orders in the stock was charged with leading the attack on it yesterday, but members of the firm said that they had been acting merely as brokers for customers in the regular order of business.
Following the newspaper "roasts," which helped further to destroy public confidence, two brokers on Logan & Bryan's continental wire system resorted to tactics of a kind to force lower prices. This wire has over one hundred out-of-town broker connections. A report was sent over the wire that Nat. C. Goodwin & Company had failed. Another followed it that the Rawhide Coalition Mines Company was about to go into the hands of a receiver. The Nevada Mining News accused Nat. Boas of San Francisco and J. C. Weir of New York of exchanging messages to this effect over the Logan & Bryan wire systems, so that all correspondents on the wire would have the false reports. Both Boas and Weir were believed to be "short" of the stock. Both were openly operating for a further decline. These and similar tactics resulted in a further easing off in price to 40 cents bid on December 24th, which was the "low" on the movement.
Two weeks after Christmas the stock rallied to 58 bid, 59 asked, and the market was firm again. On January 14 the price bulged to 70. At this point the stock again became the center of attack. By January 20 the price had eased back to 50.
Thus far the net result of Nat. C. Goodwin & Company's various campaigns on Rawhide Coalition was the distribution of some 600,000 shares of stock. The issue had been well exploited. It had a big following and a broad market. Some excellent judges of mine values had become stockholders. The company, however, was still unfinanced for a long period of systematic mine development and mill construction.
We realized very clearly that some arrangement would have to be perfected to avoid a repetition of the trouble which the New York Stock Exchange brokerage firm had made us.