“I want to sell out, bag and baggage,” he said. “I want to get rid of every one of my 40,000 shares. Here they are; put them on the market and sell them.” The stockbroker told him that that would never do. If he wanted to realize full value for his holdings he would have to go about it in a different way, for if he should throw his 40,000 shares into the market it would knock the bottom out of prices, and he would get little or nothing for his stock. Mr. Bannigan saw the point and asked what he ought to do.
“Buy,” said the broker.
“But I don’t want to buy; I have got more now than I want.”
“That is all right; buy anyway; that will make a market for the stock, and you can unload when the time comes.”
“How much must I buy?”
“Oh, about $250,000 worth.”
“But I have not got $250,000 in cash to go and buy rubber stock.”
“Well, you can borrow it; a man in your position, Mr. Bannigan, will have no difficulty in borrowing $250,000.”
Much against his will the old man was finally persuaded to do as he was told. About two weeks later the broker wrote to him that he must buy some more—this time $200,000 worth. Mr. Bannigan used rather strong language, but finally yielded as before. He borrowed $200,000 and turned it over. With this additional capital to work on, the broker continued to manipulate the market. The insiders soon discovered that some strong party was buying, but they did not know who, Bannigan having carefully kept himself in the background. His broker operated skillfully in the stock, one day buying, the next selling, to keep the stock active. The broker after a while began to borrow large amounts of the stock. This convinced the insiders that there was a big short interest somewhere, and they got together in order to squeeze the shorts. The inside holders who controlled most of the stock combined to squeeze “the shorts” out. In furtherance of this plan they put the price up to 61, and at about that figure Bannigan’s stock was all unloaded. Bannigan now found himself full of money, while the other fellows were filled up with his stock. They never awakened to the fact that the president had sold out on them until his shares were delivered against their purchases, as they thought, of “short” stock. Rubber broke and did not stop tumbling until it had gone from 61 to 16.
This deal had all the elements of a comedy-drama, and the playwright who can do it justice will find material there which will make him an everlasting fortune and reputation.