78 NATURE OF CAPITAL AND INCOME [Cuar.V 
him $500 for the privilege of buying $1500 worth of stock 
for $1000. 
We thus see that the price at which the new stock is 
issued does not of itself affect the balance due the share- 
holders. And yet the price of issue is not a matter 
of indifference. The lower the price of issue, the greater 
the inducement to the individual stockholder to subscribe, 
or to find some one else to subscribe instead, and buy his 
“right.” Neglect to subscribe (or to sell the right to sub- 
scribe) would then cause a loss. The value of the old shares 
will be lowered in any event, and in such subscription or 
sale lies the only means of indemnification. For these 
reasons, it is usual for new stock to be offered to the original 
stockholders below the market price. 
The exact compensation between the value of the new 
rights and the depreciation of the old stock is seldom realized 
in practice, because the company may be in a position to 
invest the new sums to advantage, in other words, to buy 
assets which are worth more than cost. In this case there 
may be little or no loss in the value of the old shares. But 
the point emphasized still remains true, that the price 
of issue does not of itself create additional capital value 
through the “right to subscribe.” Any increase of value 
will be due to unusual opportunities for investment, — to 
economic causes and not to mere bookkeeping changes. 
Of course, it may be true that the very fact of issu- 
ing new shares may of itself create a different opinion 
in the stock market and influence prices there for better or 
worse. A low price of issue may, for instance, make the 
stock more available for small investors, and the conse- 
quent increase in the volume of the stock on the market 
may make it, temporarily at least, a subject for the specu- 
lation of pools. Such facts, while they modify the results, 
do not affect the principle.