PROMOTERS' PROFITS IN THE ESTABLISHMENT OF TRUSTS
In this chapter it is proposed to indicate by a study of individual trust promotions the importance of promoters' profits as a cause contributing to the formation of trusts.
The function and work of the promoter have been well described elsewhere,1 and need not be dwelt upon here in any detail. Briefly, in a typical trust promotion the promoter secured options on the plants that were to be combined; arranged, usually through an underwriting syndicate, for the raising of the necessary funds; organized a corporation to acquire the plants; and provided for the transfer of the plants (or securities) to the trust.
In effecting a trust promotion the promoter had first to obtain options on the properties (or the securities), otherwise the owners would in all likelihood have advanced their purchase price as it became evident that the trust was to be formed. The promoter, to be sure, might have bought all the properties for cash, but this would have involved a great deal of risk, and would, moreover, have been difficult to finance. In fact, it was rarely done. Second, he had to secure financial backing, since the trust required working capital (it did not ordinarily acquire the working capital of the constituent companies), and since some owners would almost certainly demand cash for their plants, refusing to accept securities, the value of which was more or less problematical.2 Generally speaking, however, the amount____________________