Letters to the Editor CB Perception causes rise and fall of stock

As a layman I would like to express my opinions on the price of stocks.

Stock prices may rise or fall depending on the public’s perception alone. The profit or loss of the individual company does not in itself cause the rise and fall of stock prices. Two companies of equal net worth and holding equal properties may vary by four times in their stock prices. If a company can acquire a good public image through advertising or good public relations through the underwriting broker, then the public perceives that the stock may rise. If the perception is great enough, the demand by the public will force the price up, or the perception of a fall will cause the stock to fall.

I own stocks in 20 junior companies because I perceive that the shares are undervalued, and I hope the public will also desire to buy. That is when I will make my money — not on how much money the company may make.

On the other hand, many mine owners forget the public whose shares supplied the capital that resulted in the mine operation and on the good news of a discovery, enter the market to sell millions of new shares and vote opt ions to themselves, thereby reducing the equity of the stockholders whose seed money made it all possible. The new money provides a source to acquire new claims, takeovers, and higher salaries. If the mine shows a profit, a small dividend is offered as a sop. The owners with their increased shares benefit the most. This is competitive free enterprise. If the shareholders perceive that they have been taken then they sell and the price drops.

If the owners would declare a stock split at the same time they sell the new shares, the old stockholders would hold their equity. When a stockholder sells in disgust, only the stockbroker makes money. With its many faults I would not have the destruction of the free enterprise system by a government agency. Harry Selden Mechanicsville, Va.