THE Henry Ford publicity service, which may or may not consist entirely of Mr. Ford himself, functioned splendidly during the recent dispute over the allocation of shares in the new Ford Motor Company of England, Ltd. It was announced that Mr. Ford would prevent the hogging of the issue by Americans by allotting forty per cent of the shares to British applicants for small blocks.

This was good news for the lucky applicants and won Mr. Ford not only newspaper space but British good will but the inference that his plan will keep such a large percentage of the stock in British hands is absurd. The shares have and will have an open market and if Americans want more of them than they were allotted from the original issue they can easily buy them. They probably will.

Some Englishmen are frankly worried by “American penetration” and several companies have taken steps to reduce foreign ownership to a minimum. The Marconi Wireless Company, at a special meeting, voted to limit foreign stock holdings to twenty-five per cent.

Experience has shown over and over again, though, that in any civilized capitalist country, any group can buy as much of a company’s stock as it wants, even a controlling interest, providing the members are willing to pay the price. The only way for the British to keep their shares out of American hands is to agree not to sell them at any price.

The Produce Exchange has just opened its floor to trading in securities which formerly had a market only “over the counter.” The first two sessions saw only about 30,000 shares change hands, which was less than half of one per cent of the turnover during those days on the Stock Exchange. The experiment nevertheless will be watched with great interest.

“Over the counter” trading which is carried on over the telephone between individuals, has its disadvantages, some of which were pointed out by Timothy J. Shea, in charge of the Bureau of Securities of the New York Attorney-General’s office. One of the most important is the difficulty of testing the strength of the purchasing and selling power represented by the bid and asked quotations supplied by certain houses.

Another, probably even more important, is the difficulty of supervising securities. The Unlisted Securities Dealers maintain discipline among themselves but the “over the counter” market cannot possibly be as rigid in its requirements for admission as are the Stock Exchange and the Curb Market. If dubious securities are floated the only place for them is an unorganized market.

The Produce Exchange plans to attract as many reputable unlisted securities as possible, thereby affording protection to the investor and making commissions for its members. The success of the plan would be desirable in many ways. The obstacles, though, are serious. The maintenance of a broad organized market usually necessitates heavy activity and a large floating supply of the securities enjoying trading privileges. In most cases, the Produce Exchange market will have neither. Under these circumstances manipulation is sometimes dangerously easy.

These obstacles were well known to the authorities of the Produce Exchange, who for a full year studied the problems they were to face and then decided that they could be overcome. The members of the Unlisted Securities Dealers’ Association are sceptical, to say the least. The public can watch with equanimity. If the experiment proves a failure the community at large will lose nothing; if it succeeds, the benefits will be widely diffused.

Source: Outlook, 2 January 1929