New Issues

Offered to the public last week were the following corporate securities:

Lane-Wells Co., 208,006 shares of common stock at $15.25 a share. Back in Depression I, two middle-aged engineers named Bill Lane and Walt Wells, down to their last $500, perfected a gun with which they could shoot through the steel-&-cement well-casing of dry or abandoned oil wells at levels thought to be oil-bearing. Since then they have turned a pretty penny ($590,814 net in 1937, $310,458 to June 1938). Of last week's issue, floated to pay off loans and finance expansion, 58,006 shares were new securities, 150,000 were already outstanding in the hands of Lane, Wells, their wives. A syndicate headed by Blyth & Co. had no trouble selling them.

Phillips Petroleum Co., $25,000,000 in 3% convertible debentures (TIME, Aug. 8). Stockholders subscribed to this issue for retiring loans so eagerly that the underwriters, First Boston Corp., had only $1,325,500 to sell the general public.

Youngstown Sheet & Tube Co., sixth largest U. S. Steel producer, $30,000,000 in 4% convertible debentures--$12,500,000 to repay bank loans, $17,500,000 for expansion. The issue, postponed when it was first proposed last October, sold sluggishly. Underwriters headed by Kuhn, Loeb & Co. and Smith, Barney & Co. were said to have nearly $4,500,000 left on their hands.

The trouble which beset the Youngstown issue helps explain a relatively new departure in U. S. financing--private sale of securities from corporation to investor without benefit of underwriters or SEC. Last year this kind of quiet dickering achieved a record volume of $500,000,000. This year, private sales have already reached $300,000,000. Fortnight ago, Celanese Corp. floated $10,000,000 in debentures privately. Other examples: U. S. Rubber, $45,000,000; Consolidated Oil $25,000,000; Detroit Edison, $15,000,000.

The open market is now more receptive than last year to new issues, but private sales are continuing because issuers can avoid the expense of underwriting and the troubles of SEC registration. Chief buyers are big insurance companies, which generally take an entire issue. This tends to give the insurance companies substantial say in the management of the issuer. Before Phillips Petroleum could market last week's issue, for instance, it had to get permission from a group of insurance firms to which it sold $23,000,000 in debentures in 1935 and 1937. To many a SEC official such circumstances have long spelled monopoly. Last week SEC began its long-expected investigation of monopoly in insurance companies by sending an exhaustive questionnaire to 406 of them. Chief aim: to examine their part in private financing.

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