00:00From the Library of Congress in Washington, D.C.
00:41In a typical city or town, on a typical residential street, we find a typical home occupied by a typical
00:49American family.
00:52Like millions of his fellow Americans, John Q. Public earns enough money to keep up the payments on a new
00:58car.
01:04He takes great pride in owning a fine, new, long-term, mortgaged home that was built to last a lifetime.
01:17Mrs. John Q. Public no longer finds housework fatiguing drudgery, thanks to a host of labor-saving devices, including her
01:26husband.
01:27Mr. John Q., because of a 40-hour week, has the leisure to dream about his favorite sport.
01:36Darling!
01:37Darling!
01:43Oftentimes, in a secluded corner of his private den, John Q. reflects on some of the better things he has
01:50done with his life.
01:51Insurance to protect his family if he is called before his time.
01:56Money in a savings account for emergencies.
01:59For summer vacations.
02:01And to help put John Q. Jr. through college.
02:07In spite of the high cost of being a husband and father, John Q. has a private little nest egg.
02:14His practical nature tells him it ought to do more than collect moths.
02:18Well, let's see, where did I put this thing?
02:21I know it's...
02:24Hmm, hmm, common stock.
02:27Do I own any?
02:29I don't even know what they are!
02:31Mm-hmm.
02:32In that case, it might be a good idea to get a little information.
02:36Let's start with a fellow who owns and operates a company that makes and sells oil drums.
02:42Each year, customers buy more and more from our friend, because he makes a better oil drum than his competitors.
02:51One day, customers demand more oil drums than the owner can produce.
02:55He'll have to build a larger plant to expand production.
03:00He figures it will take about $3 million to do the job.
03:04So he decides to form a corporation to sell shares in his business to raise the capital he needs.
03:12First, the owner goes to the state government to get a corporation charter and permit to sell shares in this
03:17business.
03:19Next, our friend goes to an investment banker and shows him the record of the oil drum manufacturing company's past
03:25performance and plans for expansion.
03:28The investment banker decides to help our friend sell shares in the corporation to raise the $3 million.
03:36However, before any shares in the corporation can be sold, certain information must be filed with the Securities and Exchange
03:43Commission in Washington.
03:45The investment banker and the owner must swear that the information they file contains nothing but the truth.
03:53Registration with the SEC does not imply that the government approves the stock issue as a good investment,
04:00but only assures the public that if any of the material statements about the stock issue are false,
04:05punishment will be according to the law.
04:09After SEC registration is effective, the investment banker pays the owner $3 million in exchange for a certain number of
04:18shares in the oil drum manufacturing corporation.
04:21The investment banker sells shares of the common stock to people at a price which returns his $3 million investment
04:29and shows a profit for his services in selling the stock.
04:34Money received from the sale of shares in the business builds a new and better plant,
04:40which produces more and better oil drums.
04:46The people who bought the common stock own proportionate shares in the corporation's plan,
04:52tools, equipment, and all of its assets.
04:58Common stockholders elect the directors of the corporation.
05:02Directors represent the stockholders and are responsible for the way the business is run.
05:09Directors determine the amount of dividends, if any, to be paid out of earnings to the stockholders.
05:15Naturally, when stockholders invest in a business,
05:18they hope to receive dividends to help pay for necessities of life.
05:24Within a few short years, an increasing demand for the company's product poses another problem for our friend.
05:31How can he fill all the orders?
05:34He will have to build more plants and buy more tools to increase production of oil drums.
05:40It will take about $20 million to do the job.
05:44One way to get this additional capital is to sell more stock to many more people.
05:51So the oil drum manufacturing corporation votes to send its president to the New York Stock Exchange
05:57to see if their common stock can qualify for listing.
06:01The corporation wants to list its securities on the exchange
06:04so that the additional stock they need to sell
06:07will be more attractive to investors all over the nation.
06:12Securities listed on the New York Stock Exchange
06:15can be sold for cash anytime in this national marketplace.
06:20Each year, as many as 100 corporations inquire about listing their securities.
06:26Only 20 or 30 corporations are accepted for listing.
06:30And then, only after a thorough diagnosis of the corporation's financial health.
06:35Calling the president of the Oil Drum Manufacturing Corporation.
06:39Calling the president of the Oil Drum Manufacturing Corporation.
06:43Report to examination room B.
06:46Attention all members of the stock list department.
06:49Report to examination room B.
06:53The stock list department investigates the qualifications
06:56of corporations examined for listing on the New York Stock Exchange.
07:00The corporation must have substantial assets in the form of plants,
07:06tools, equipment, and cash.
07:09It must have at least 1,500 stockholders
07:12who, together, own at least 300,000 shares of the corporation's stock.
07:17The corporation must show successful management and sales records
07:21and annual net earnings at the time of listing of at least $1 million.
07:26The proposed stock issue must meet federal, state,
07:31and New York Stock Exchange regulations.
07:33The corporation must agree to report to its stockholders at frequent intervals.
07:38If the examination by the stock list department indicates
07:42the corporation meets minimum requirements of the exchange
07:46at the time of the examination,
07:48the corporation's application for listing is recommended.
07:53The Board of Governors of the New York Stock Exchange
07:56finally approves the application
07:58and sees that it is made public.
08:01X-tree, X-tree, read all about it.
08:04Now that the Oil Drum Manufacturing Corporation's stock is listed,
08:08its name is abbreviated for use on the ticker tape.
08:12Each time ODM stock or any other stock listed on the exchange
08:16is bought or sold,
08:18the ticker tape flashes all over the nation
08:21the price and number of shares traded.
08:26A buyer in Colorado wants to purchase some ODM stock.
08:30The buyer's broker in Colorado
08:32sees that the last ODM transaction was at $10 a share.
08:37The buyer could buy from 1 to 99 shares,
08:41which would be known as an odd lot.
08:43But our Colorado friend decides to invest in 100 shares,
08:50known as a round lot.
08:53The Colorado broker wires the order to his New York office.
08:58The buy order is telephoned to the floor of the New York Stock Exchange.
09:02It is given to the firm's floor partner,
09:05who becomes the representative of the buyer in Colorado.
09:08The floor partner goes to the post where ODM stock is traded.
09:14The representative of the buyer in Colorado
09:16bids $10 a share for 100 shares.
09:19But at the moment, there is no stock offered for sale at this price.
09:24In the meantime, however, in Maine,
09:27an ODM stockholder who needs cash
09:30decides to sell his 100 shares if he can get $10 a share.
09:35The Maine broker wires the sell order
09:38to his firm's representative on the floor of the New York Stock Exchange.
09:43This firm's floor partner, representing the seller in Maine,
09:47offers to sell 100 shares of ODM stock at $10 a share.
09:52The price of $10 a share is mutually acceptable,
09:56and the transaction is made.
09:59Like the cowboy in Colorado and the fisherman in Maine,
10:04investors all over the country use the facilities of brokers
10:08who are members of the New York Stock Exchange
10:10whenever they want to buy or sell stock
10:13of companies listed on this national market.
10:17Yesterday's savings financed the miraculous growth of our railroads,
10:24automobiles,
10:28airplanes,
10:31farm machinery,
10:36communications,
10:38electric light and power,
10:42textiles,
10:44and countless other industries
10:46contributing to a more enjoyable life.
10:50If a part of our savings continue to flow into industry,
10:54American labor,
10:55management,
10:56and capital
10:57can continue to build new tools and plants.
11:01Industrial expansion creates jobs
11:03for hundreds of thousands of young people
11:06who must find employment each year.
11:08A growing capacity to produce things
11:11which make life better in peacetime
11:13can be our greatest protection in time of war.
11:17When danger threatens,
11:19we can convert industry
11:20to produce the things we need to defend ourselves.
11:24Common stock investments
11:25have helped to make our country prosperous and powerful.
11:29Owning a share in American industry
11:31is like owning a share in the future of our nation.
11:35But remember John Q.
11:38There is a risk
11:39as well as an advantage
11:41in owning any kind of property.
11:43So,
11:44get the facts
11:45before you put your money to work.
11:57This has been a presentation
11:59of the Library of Congress.
12:01Visit us at loc.gov.
12:03Thank you very much for calling us.
12:05Bye.
12:06Bye.
12:07You
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