These considerations are in contrast to the statement of Mr. Goldsmith: "The market value of the stock is almost always above par, increasing in proportion to the age of the mill." The writer inclined to doubt this accuracy of Mr. Goldsmith's information.[432]
Referring now to the sale of stock at less than its book value, it may be noticed again that during the war the Augusta Factory was sold into new hands at, ostensibly, $200,000. The new company capitalized it at $600,000 about what it was worth.[433] F. W. Wagener and Julius Koester bought in the property which is now the Royal Mills, at Charleston, at about 20 cents on the dollar.[434] An indication of the prevalence of this condition is seen in the fact that the people of Charleston, who previously had been generous subscribers to cotton mill stock, every promoter going to Charleston for the placement of a large block, "about 1905 or 6 ... got canny, and quit subscribing to the stock of new mills, for they found they could wait and buy the stock at less than par. For twelve or fourteen years Charleston has not contributed to new mills."[435] The reason for the general drop in the value of mill securities twelve or fourteen years ago lies in the depression in the industry caused by the ill-considered boom in mill building, already dwelt upon; a cause which had its rise earlier, but which no doubt continued to operate through this later period, was set forth plainly by a banker of Columbia. He said:
"Suppose a Southerner was promoting a mill that was to cost $1,000,000. In contracting for $600,000 worth of machinery, the machinery people would take half of the amount in stock. Machinery was in great demand, and high in price. The machinery manufacturers could throw their stock on the market quickly at 50 cents on the dollar, and make money. But in doing this they hurt the price of the stock of the mill."[436]
There seems to be pretty clear cause for the sensational drop that once occurred in the selling price of the stock of Pacolet, one of the greatest of the Southern mills. The factory had been making heavy goods for the Chinese market; this market was so unfavorably affected by the exclusion act that the goods became unprofitable to the mill. It cost money to change the machinery. So much preferred stock was issued that the common stock of the mill fell from 300 to a point below par.[437]
It has been seen that for the last six years of the first decade of the operation of the Laurens Mills, 12 per cent. annual dividends were paid. Within two years after the fight between local shareholders and Northern selling agents, the dividends got down to 5 per cent. and the stock fell from 175 to par.[438] A similar decline has been very apparent in the stock of Pelzer, in the same State, which ten years ago was selling at 175 or 180, and which now may be bought at a little above par.
T. C. Duncan built the Union Mills, and these succeeded. The stock went to $150 a share in 1900 or 1902. Then he built the Buffalo Mills. The projector of these mills was, however, a cotton speculator, it is said, and the market went against him. The town of Union, South Carolina, "busted with Tom Duncan", as it was expressed.
At the opening of the cotton mill period, it was said of the Rock Bill Cotton Factory that "The best evidence of its success is that not one dollar of its stock can be bought."[439] In the same month of the same year it was published that of the successful Mississippi mills, "The one at Wesson pays 26 per cent. dividends, and the stock is worth over 300."[440] Pacolet was built in 1880. The architect suggested a certain firm as selling agents for the mill, and Captain John H. Montgomery, the projector of the company, was introduced to a member of this firm. In consideration of receiving the account of the factory, this official subscribed for the commission firm to fifty or a hundred shares of Pacolet's stock. He told a friend shortly afterwards that he did not know why he bought the stock, and offered to sell it at $50 on the share. It happened that he held the stock, and he afterwards sold the stock at $300 per share.[441]
This buoyant success of the early mills, previously remarked with reference to profits and dividends, and here seen in the advance in the price of stock, is further illustrated by the history of some plants now having large capitalization. These sold additional stock to the original subscribers at a reduction—say at 75 or 80 when the par was 100. The ventures were so profitable that the stock remained at par value.[442] The same observation comes out, as applicable to a still earlier time, in the circumstance of the issue, in 1865, when the Augusta Factory was paying more than 14 per cent. dividends of three shares for one, bringing up the capitalization to $600,000.[443]
Fifteen years later it was said: "Augusta is becoming prominent in the South as a manufacturing city, there being eight cotton factories running here successfully.... These factories aggregate about 2,500 looms and 10,000 spindles; they consume about 50,000 bales of cotton annually, manufacture about 50,000,000 yarns (yards) of cloths, (this besides yarn mills) and employ 2,000 operatives. The capital stock of nearly all these factories is at a high premium."[444]
If the success of the Augusta Factory in 1865 was sufficient to maintain at par issues of extra stock, as just noted, the reverse was true of Graniteville two years later, when the elder Hickman took charge. Twenty years earlier, the plant had cost to build $375,000. By 1867 the stock had increased to $716,000, and the shares had fallen to $62.50 in value. The mill was $50,000 in debt. Colonel Hickman cancelled $116,000 capital shares, bringing the interest-bearing stock of the company down to $600,000. He restored the depreciated stock to its proper value.[445] Reference has been made to a stock dividend of 20 per cent. issued by a mill of Gastonia within the last few years.