One financial agent told me he floated five companies in three weeks, viz.: The Fry’s Gully, Du Toit’s Pan; the De Beer’s Central, De Beer’s; the Barnato Co., Kimberley; the Frere Co., De Beer’s; and the Globe Co., Du Toit’s Pan; and that although the capital required for the five companies was £496,000 only, yet £1,230,000 passed through his hands in the short time I have mentioned.
Business of every kind was neglected, mining operations were all but suspended, the sole topic being the share market and the profits to be made there. Many made unexpected fortunes, and realized in a few months gains larger than those a whole lifetime of work and economy could have procured them had they continued their ordinary pursuits. Under these circumstances it was only natural that many owners of worthless ground took advantage of the general excitement to form companies which had hardly the remotest possibility of success; it was evident that it mattered very little to the general public, or the majority at all events, what the company was, what the value of the claims might be or where they were situated, so long as it was a diamond-mining company it was quite sufficient to command public favor. The public bought shares in the diamond-mining companies as to-day they are doing in the gold companies, not to obtain dividends on their capital invested, but for purposes of pure speculation.
One of the most flagrant instances of bogus company promoting which ever came under notice was the imposition attempted at a farm named Frankfort, situated in the Free State, about sixteen miles from Kimberley.
This farm was prospected, diamonds found (?), a mine surveyed, claims given out, dams dug, shafts sunk and machinery erected, simply to bolster up a gigantic swindle, which but for the outspoken opinion of a surveyor named Kitto would have been foisted, through a well known European firm, who merely awaited his report, on the English public for £450,000. To assist in gulling home investors an American adventurer was actually sent to England with a parcel of beautiful diamonds, certified by affidavit to have been found in this mine, in order that those concerned in introducing the scheme to the public might give visible and tangible proof of the enormous value of the property which they had for disposal. Mr. Kitto’s report, however, decided the fate of what he terms “one of the most shameful swindles ever attempted.”
Many a laughable story is told of how diamonds were turned out of, or—to be more accurate—put into this mine. One probable investor on going down a shaft to examine the ground at the bottom had a hail-storm of little diamonds showered on him (some of which lit on the brim of his hat) which were meant for him to unearth in the loose ground at the bottom. This wonderful discovery of the diamond’s new “locate” did not tend to increase this gentleman’s opinion of the proffered investment! On another occasion an astute matron interested in the swindle roundly bullied her servants for their carelessness in finding only seven diamonds instead of eight, with which she had “salted” the wash-up.
To make a long story short, the “best laid schemes of mice and men gang aft agley,” the bubble burst, and the proprietors of this wonderful mine allowed the knowledge of its startling richness to sink into oblivion, and found consolation and support in ministering to the bodily wants of those whom business or pleasure took to that worked-out and forsaken Golconda.
As another example of how things were managed in those days when the share mania was at its height, I may mention the case of a well-known citizen who conceived the happy idea of putting into a company certain claims in the Bulfontein mine which were then in his possession. These claims were twenty-six and one-half in number, and the services of an energetic promoter (who was to be paid £500 if he pushed the company through) having been secured, a prospectus pithily written was submitted to several well-known men who agreed to become provisional directors. The capital of the company was stipulated to be £30,000, in 6,000 shares of £5 each, of which £1 was payable on application, a similar sum to be paid on allotment. The vendor, however, reserved 3,000 shares for himself, so that only 3,000 were offered to the public. The modus operandi of floating this company was somewhat unique. It was known that locally the company could not go through, as the unkind assertion that “half of the ground was in the street” was generally believed, but that difficulty the diplomatic promoter overcame by sending copies of the prospectus to agents in the Colony and Natal fully a week before it was allowed to see the light of day on the Fields. This turned out to be a rather clever dodge, for, before its publication in the local prints, the secretary had in his possession sufficient applications by wire, the forms for which duly signed afterward came to hand, to insure the safety of the company. Locally there were but few applications. The first instalment of the company, however, was only just subscribed for and the share allotment made, when the collapse in the share market took place. What, however, is a singular thing in reference to this company is, that the money paid on application and that paid on allotment, which must have amounted to some thousands of pounds, has never yet been accounted for. The directors fell away one by one, no work was done or machinery ordered, and eventually the vendor became his own chairman, directors secretary, trustee, manager and the general multum in parvo of the Cosmopolitan Diamond Mining Company, Bulfontein mine! It has transpired that the shareholders’ money had not even been devoted to paying the licenses on the claims, for I find that up to Feb. 1887, there was an amount due to the London and South African Exploration Company (limited) of £2,008 for licenses on the claims from Sept. 1st, 1880. When this company was introduced to the public, one of the clauses of the prospectus read as follows:
“The well-known and regular returns of the Bulfontein mine are proverbial, and most of the companies recently formed at a very much higher rate per claim, are even now at a respectable premium; which, coupled with the fact that all difficulties and obstructions having been removed by the settlement arrived at between the claim-holders generally and the London and South African Exploration Company (limited), the provisional directors have all confidence in the future of this company.”
Although the vendor then stated that a settlement had been arrived at, yet in March, 1884, when sued by the London and South African Exploration Company for the rent which was due to them, this gentleman pleaded that the company had no title! Either his first statement in the prospectus or his last in pleading must have been audacious in the extreme.
The London and South African Exploration Company withdrew from the case, probably to bring it on again at a later period.[[53]] Some shareholders are asking what has become of the money, and whether the company should not be forced into liquidation, that the matter may be fully inquired into. The promoter of the company was never fully paid, and many outstanding accounts were never settled.