THE FIRING OF THE FIRST GUNS
Before the Scheftels corporation was on the Street three months it almost came a cropper. On the strength of excellent mine news it purchased nearly 300,000 shares of Rawhide Coalition in the open market, up to 71 cents per share. A determined drive was made against the stock by mining-stock brokerage firms which had sold it short. Bales of borrowed stock were thrown on the market by the crowd operating for the decline. The Scheftels company took it all in. Letters and telegrams were sent broadcast by market enemies urging stockholders to sell. A powerful clique had been losing big sums on the rise.
The Scheftels company published advertisements calling upon margin traders to demand delivery of their certificates. This expedient proved of small utility. The brokers continued to hold off deliveries to customers and sold and delivered to us all the stocks that they could borrow or lay hands on. The continued selling finally made inroads on the Scheftels corporation's cash-reserve to a point that forced it one day to stand aside and leave the market to the sharpshooters. That day, in a few hours, approximately half a million shares of Rawhide Coalition changed hands out of a capitalization of 3,000,000 shares. The corporation's loans were called. This forced it to throw large blocks of stock on the market. A sharp break ensued. That was just what was wanted by the interests which were gunning for us. They covered their short sales at great profit.
In the midst of the mêlée the Scheftels company tendered a Stock Exchange house of great prominence, which had loaned it for the account of a Salt Lake firm of brokers $12,500 on 50,000 shares of Rawhide Coalition, the money to take up the loan. A representative of the Stock Exchange house sheepishly stated that his firm had loaned part of the pledged stock to out-of-town brokers. He asked for time. Under threat of dire consequences the Stock Exchange firm bought stock back from us in the open market that afternoon to supply the deficiency, and then made delivery of this stock back to us in lieu of that which they had parted with. It had been specifically stipulated by the Scheftels company when the loan was made that the certificates must be held intact and that the stock must not be loaned out or sold while the money loan was in force.
This experience was repeated frequently during the Scheftels career on the Curb. It cost B. H. Scheftels & Company more than one million dollars, during the nineteen months of its existence, in giving loyal market support, in times of "professional" attack, to the stocks it had fathered or promoted and felt moral responsibility for.
Time and again the Scheftels company found among stocks delivered to it, against purchases made in the open market, the identical certificates it had pledged with loan-brokers as collateral for loans, and which had been hypothecated by it with the specific proviso that the certificates were not to be used. It opened our eyes to one of the most commonplace practices, not only on the Curb, but also on the Stock Exchange. Hardly a failure occurs on any of the Exchanges or on the Curb that does not reveal customers' certificates, which were originally pledged with the understanding that they were not to be "used," in the strong-boxes of others.
The first grievous offense of the publicity forces of the Scheftels corporation against Wall Street's "Oh-let-us-alone" promotion combine was a wallop in April and May, 1909, through the Scheftels market literature, at Nevada-Utah.
The combination which owned control took with bad grace the strictures on the property. We heard an awful underground roar. At that time the price of Nevada-Utah stock was around $3. The Scheftels Market Letter said that there was probably not 30 cents of share value behind the property. The price immediately began to crumble. It has been tobogganing ever since. The stock at the beginning of September of this year was quoted at 37½ to 50 cents.
Such a thing as printing facts which would enlighten stockholders and the public as to the actual value and condition had not before been heard of when such enlightenment ran contrary to the plans of strongly entrenched promoters on the Street.
The campaign against Nevada-Utah, therefore, directed widespread attention to B. H. Scheftels & Company and the Mining Financial News.
Following the Nevada-Utah disclosure, the Daily Market Letter and the Weekly Market Letter of the Scheftels corporation and the Mining Financial News took a good, strong, husky "fall" out of the La Rose Mines Company, capitalized for $7,500,000. The La Rose owns one of the greatest producing mines in the Cobalt silver camp. A market scheme was in progress, with La Rose as the medium, and W. B. Thompson, of Nipissing fame, as a chief manipulator. We called a halt to the game when the price reached a "high" of $8.50, and saved the public a huge sum of money. Under our campaigning the stock declined to $4, a decrease of $6,750,000 in the market value of the capitalization. This made W. B. Thompson and his associates the implacable enemies of the Scheftels company and myself. We didn't worry much. We were catering to the public. Indeed, we were pleased with our work.
Following this incident, the Scheftels Market Letter and the Mining Financial News took a smash at a mining-stock deal in which W. B. Thompson and the Guggenheims were jointly interested. It was the now notorious Cumberland-Ely-Nevada Consolidated merger. Later the merger was enlarged and took in the Utah Copper Company, or rather the Utah Copper Company took in the others, and the Scheftels propaganda found another opportunity to do a great service for the stockholders of Nevada Consolidated.
Our attack hurt the Guggenheim reputation among investors all over the country and contributed to reduce their influence over the large stockholding body—more than 6,000 men and women—of Nevada Consolidated. Though finally successful, the Guggenheims were sore from the lashing and exposures to which they had been subjected. As for the Scheftels company and the Mining Financial News, they had still further established the honesty and value of their publicity service.
A market scheme to balloon the price of Ray Central Copper Company shares to several times their value was a precious enterprise against which we trained our publicity guns and fired several effective broadsides. The effort of the promoters to connect with the public purse here would not have been half so sensational if men of lesser prominence were identified with the operation. In our "bear" publicity on this one we minced no words. In doing so we again hit another powerful interest—the Lewisohns.
Later the exposure by the Mining Financial News and the Scheftels Market Letter of market manipulations of the Lewisohn-controlled Kerr Lake still further "endeared" the members of these two organizations to that powerful faction, and more closely cemented the ties of fellowship between the ruling powers.
Keystone Copper, another Lewisohn "baby," was put through its courses on the Curb while Kerr Lake was being played in a stellar rôle. The deal in Keystone was an unobtrusive little thing, but awful good as far as it went from the one-sided point of view. I turned the searchlight of publicity on Keystone.
The Scheftels Market Letter and Mining Financial News disclosures in the interests of speculators and investors regarding Nevada-Utah, La Rose, Cumberland-Ely, Nevada Consolidated, Utah Copper, Ray Central, and Kerr Lake were sensational enough, but they by no means included all of the work in this line. During 1909 this publicity literature took in practically every important mining company whose shares were traded in on the New York Curb. The unpleasant truths these forces were obliged to tell from time to time touched the delicate sensibilities of many leading lights on the Street. These had grown accustomed to an unvarying diet of sweets.
It would seem that their appetite for saccharine provender would have become cloyed and that a change would be a grateful relief. It was not. The truth was distasteful. It interfered with the noble industry of mining the public and it cut down the profits of that end of the game. In keeping up the record of day-by-day market and mine developments these publicity agents punctured many a rainbow-tinted balloon. Very frequently they gave to the public its first definite and intelligent idea of real value behind promotions and in properties. Where market prices represented an overplus of hopes and expectations the truth was told. The aim was to take mining speculation out of the clouds and plant its feet firmly on earth.
In this laudable effort we ran counter to the plans of the mighty. We also violated the vulgar unwritten rule of some of the Wall Street fraternity—"never educate a sucker." Our publicity work caused a readjustment of judgment and market values, besides those already mentioned, on such stocks as First National, Butte & New York, Trinity Copper, Micmac, Ohio Copper, United Copper, Davis-Daly, Montgomery-Shoshone, Goldfield Consolidated, Combination Fraction, British Columbia, Granby, Cobalt Central, Chicago Subway, and sixty to eighty others.
The live wires of our publicity service blistered the flesh of the Guggenheims, the Thompsons and the Lewisohns, and perturbed their widely diffused affiliations, connections and allies, including John Hays Hammond, J. Parke Channing, and E. P. Earle; also Charles M. Schwab, E. C. Converse, B. M. Baruch, United States Senator George S. Nixon, George Wingfield, Hooley, Learned & Company, many other New York Stock Exchange houses, a group of powerful corporation law firms, a noted crowd of influential politicians, Curb stockbrokers who had grown fat executing manipulative orders for the "inside," bankers who carried on deposit the cash balances of the mining companies, and even J. P. Morgan & Company, who were partners of the Guggenheims in their Alaska ventures and were for a time said to be meditating a merger of the copper companies of the country with those controlled by the Guggenheims as a nucleus.