LETTER OF TRANSMITTAL SECURITIES AND EXCHANGE COMMISSION, Senator JOSEPH C. O'MAHONEY, Chairman of the Temporary National Economic Committee. United States Senate, Washington, D. C. DEAR MR. CHAIRMAN: As the Commission's representative on your committee in charge of this matter, I have the honor to transmit herewith a report on a "Survey of Shareholdings in 1,710 Corporations with Securities Listed on a National Securities Exchange," prepared for the Temporary National Economic Committee by the staff of the Research and Statistics Section of the Trading and Exchange Division of the Securities and Exchange Commission. This report summarizes and discusses briefly data on the number of shareholdings in 1,710 corporations with securities listed on a national securities exchange and on the distribution of the total number of shareholdings by the estimated value and the size of individual holding. The report provides a background for the more detailed study of the distribution of stock ownership in the 200 largest nonfinancial corporations. Most of the material on which this report is based was obtained from a questionnaire addressed by the Commission on or about March 15, 1938, to companies with an issue of securities admitted to full trading privileges on a national securities exchange and, therefore, subject to registration under the Securities Exchange Act of 1934. Some preliminary results of the inquiry, which constituted a part of the regular research activities of the Commission, were presented in part II, section 3, of "Selected Statistics on Securities and on Exchange Markets," published in August 1939. The Commission has made some adjustments in the preparation of this body of material in order to coordinate the study with the program of the Temporary National Economic Committee and appreciates the opportunity for the inclusion of this survey in the statistical studies of the Committee. The main findings of the report, duly qualified in the text, are the following: 1. The 1,710 corporations covered by the study which include financial and investment companies with securities listed on a national securities exchange had nearly 14,000,000 record shareholdings or about 55 percent of the shareholdings in all American corporations. Their total assets aggregated $103,000,000,000 or about 40 percent of 1 Submitted as Monograph No. 29 of the Temporary National Economic Committee. The survey of the shareholdings in the 1,710 corporations differs from the study of the distribution of shareholdings in the 200 largest nonfinancial corporations in that information is presented only for groups of corporations arranged by industry, size, number of shareholdings, and other characteristics but not for individual corporations. Because of the large number of issues covered, it was furthermore impracticable to study separately the holdings of officers and directors and of foreigners, or to make a separate analysis of the 20 largest shareholdings, as has been done in the report upon the 200 largest nonfinancial corporations. the assets of all domestic corporations, except commercial banks and insurance companies which are practically unrepresented among the 1,710 corporations. 2. There were 1,584 common stock issues of these corporations which had a value of $35,500,000,000 representing 11,500,000 shareholdings and 797 preferred stock issues of these corporations which were valued at slightly over $6,500,000,000 and comprised about 2,500,000 record shareholdings. 3. The 2,381 common and preferred stock issues of these 1,710 corporations covered by the report had a value at the end of 1937 of about $42,000,000,000 and were held by approximately 5,000,000 shareholders. 4. Of the 14,000,000 record shareholdings about 7,500,000, or 54 percent had a value of $500 or less. These numerous holdings, however, together accounted for slightly less than 5 percent of the total value of all outstanding shares of the 2,381 issues. About 2,000,000 shareholdings had a value of $501 to $1,000, and about 3,000,000 were valued from $1,001 to $5,000. These 5,000,000 shareholdings, representing about 37 percent of the total number, accounted for only slightly more than 20 percent of their aggregate value. Thus 91 percent of the shareholdings accounted for only 26 percent of the value of all outstanding shares. There were about 1,000,000 shareholdings with a value of over $5,000 each, but they comprised about 74 percent of the shares of the 2,381 issues as measured by their value. The largest 10 percent of shareholdings accounted for over 75 percent of the value of all common shares and for about 70 percent of that of all preferred shares. 5. The number of shareholdings per issue ranged up to 67,000 among preferred stocks and 641,000 among common stocks. However, a relatively small number of widely held issues accounted for a large proportion of the total shareholdings; thus 79 common stock issues with more than about 30,000 shareholdings each accounted for around 6,700,000 shareholdings, or 58 percent of the total while the 54 preferred stock issues with over 10,000 shareholdings each accounted for about 1,000,000 shareholdings or 44 percent of the total. 6. The average value per common shareholding was about $3,100, and that of the average preferred shareholding about $2,900. However, the average value per shareholding was $1,000 or less in nearly two-fifths of the common stock issues and in one-fourth of the preferred stock issues. At the other extreme, almost one-fifth of both common and preferred stock issues had an average value per shareholding of over $5,000. Great variations existed in the average value per shareholding among major industries. 7. About 82 percent of all common and 90 percent of all preferred shareholdings fell into the odd-lot category (less than 100 shares). However, despite the heavy numerical preponderance these odd-lot holdings accounted for only 15 percent of the value of all common stocks and about 28 percent of that of all preferred stocks of the 1,710 corporations. There was considerable variation in the proportion of shares outstanding held in odd-lots by the major industry groups. Among common stock issues the proportions of odd-lot holdings and of the shares included in such holdings rose slightly but steadily, with an increase in the size of the issuing corporation. Among preferred stocks, the tendency was more moderate and less definite. In both common and preferred stocks the proportion of odd-lot holdings tended to rise with an increase in the market price per share. 8. The manufacturing companies accounted for about 6,500,000 shareholdings, worth about $26,000,000,000, or 47 percent of the number of shareholdings covered in the report and 61 percent of their value. Electric, gas, and water utilities were second, with about 2,700,000 shareholdings worth about $5,000,000,000, equivalent to 19 percent of the number of shareholdings but only 12 percent of their value. Shareholdings in railroad stocks numbered nearly 1,000,000 with a value of about $2,500,000,000; shareholdings in financial and investment companies were relatively more numerous or about 1,300,000, but they had a value of only a little over $1,000,000,000; conversely, communication companies had less than 1,000,000 shareholdings, but these were valued at over $3,000,000,000. 9. The proportion of shareholdings valued at $500 or less was considerably higher among common stocks than among preferred stocks, or 56 percent compared to 45 percent. Conversely, only 36 percent of the common shareholdings, but 44 percent of the preferred shareholdings, fell in the $1,001 to $5,000 value class. Holdings with a value of over $5,000 represented 8 percent of all common shareholdings and about 11 percent of all preferred shareholdings. 10. Among major industry groups the proportion of shareholdings with a value of $500 or less was highest among the common stocks in electric, gas, and water utilities (73.5 percent) and financial and investment companies (77.5 percent) and lowest in communication companies (28.2 percent). It was relatively low also in manufacturing (49.2 percent) and merchandising companies (51.4 percent) and relatively high in railroads (59.9 percent). Conversely, the proportion of holdings valued at over $10,000 was considerably above the average for communication companies. Among the preferred stocks, the proportion of shareholdings with a value of $500 or less was highest in the railroads (64.5 percent) and lowest in the manufacturing issues (33.4 percent). It was relatively high also for financial and investment companies (57.4 percent) and electric, gas, and water utilities (48.6 percent). It was relatively low in merchandising (41.3 percent) and communication issues (34.5 percent). The report was prepared by Helene Granby of the Research and Statistics Section, Trading and Exchange Division, of the Securities and Exchange Commission. Sincerely yours, SUMNER T. PIKE, Commissioner, |