Security Flotations and the Securities Act

Abstract

W HEN the Securities Act of 1933 went into effect a little over a year ago, borrowing by private corporations through sales of stocks and bonds had very nearly ceased. The banking suspension had occurred some four months earlier, and the deflation of the preceding three years had been felt with particular severity in the market for newly issued securities. The legalization of beer brought a number of brewery offerings into the market after the bank closings, and some others were made just before the law went into effect, but the total volume of such issues amounted to little. The past fiscal year, all but a few days of it under the Securities Act as originally passed, has shown a volume of issues only a trifle higher than in the preceding twelve months, the advance being more than accounted for by the increase in state, local, and farm loan issues, which are exempted from the provisions of the act.' The total volume of issues actually floated, according to the compilations of the Commercial and Financial Chronicle, amounted to just over I 2billion dollars in I933-34, compared to a figure of just over IS3 billions in the preceding fiscal year--the lowest of the depression. About one billion dollars represented new capital and half a billion was for refunding. Issues by public bodies amounted to I,I92 millions, against 607 millions in the preceding year, and those by private corporations to 364 millions, against 6I3 millions in I932-33. The figures of the Federal Trade Commission apply to securities registered, which may not be marketed in their entirety and are offered only after an interval of twenty days. In content, they differ from the Chronicle's compilation largely in that (i) they exclude the public group, which bulks so large in former figures, and railroads, (2) they include investment trusts sold as participating shares (excluded from the Chronicle's figures), and (3) they include deposit certificates under reorganizations. The total was 963 millions for the fiscal year; the bulk was issues of financial companies, which amounted to 609 million dollars. The latter figure is of especial interest because it gives an idea of the amount of financial flotations not included among those publicly issued. The latter amounted to little more than I0o2 million dollars according to the Chronicle's figures. The remaining items were industrial issues225 million dollars and those growing out of reorganizations -I 282 millions.2