Over the Counter & Far Away

The New York Stock Exchange tape lazied along: about 120,000 shares an hour, 610,000 shares for the full session. The 3 o'clock gong found members shrugging their shoulders at the end of one more lackadaisical, profitless day. But in the offices of Manhattan's Dillon, Read & Co., the gong was the signal for a burst of activity. Dillon, Read headed a group of investment bankers and brokers with 500,000 shares of Standard Oil Co. (New Jersey) common to sell (for the estate of Oil Heir Edward Stephen Harkness). The bankers got busy on telephone and wire. Two hours later the stock was all sold, for $17,250,000.

Thus last week was completed the largest over-the-counter transaction ever made in a security listed on the New York Exchange. The sale (at 34 1/2, closing price on the Big Board) involved nearly as many shares as all 1,344 members of the exchange had traded all that day, 100,000 more shares than they had traded the previous day. If Wall Street needed any more proof that after-closing sales had become a serious rival of trading on the floor, this was it.

Off-the-market trading spurted into big-time proportions last year, when the British began to liquidate their U. S. stocks. This month, with big domestic sales added to the British unloading, it has reached a new high. At last week's end January sales totaled 8,065,090 shares on the exchange floor, 1,032,579 off the floor. Reason: the present thin market on the exchange cannot stand the weight of big offerings. Dumping 500,000 shares of Standard Oil on the market last week would have constituted a major bear raid; its private sale disturbed quotations hardly at all. Selling securities off the exchange is expensive: for handling the Harkness stock the underwriters got 50-c- a share and the dealers who worked with them got $1 a share (regular brokerage commission would have been 16-c- a share). But the sellers got a guaranteed price, naturally preferred not to risk a market offering.

To some underwriters (like Dillon, Read) and to big exchange members, such off-the-market distributions have been a lucrative sideline to regular business. But the rank & file of Stock Exchange members have had to stand by and squirm while a lot of potential commissions went over the counter & far away. Many a broker wondered last week whether the Big Board was about to become merely a device for establishing quotations, while the business went elsewhere. Their only consolation: that big blocks of stock like Harkness' are being distributed into small investors' hands, whence it is likelier than before to return for trading on the market.

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American Telephone & Telegraph Co.'s 1940 earnings were highest in its history: $188,204,000 ($10.07 a share on its blue-chip stock), up 4.5% from 1937's record $179,834,815, up 13.3% from 1929's $166,189,758.

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