The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part I. Capital

Collection:: Economics Books

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.

Access restriction

Copyright

fullscreen: The nature of capital and income

Monograph

Chapter

Table of contents

Download

Monograph

Chapter

This page

Image fragment

Citation links

Citation recommendation