United Write-Off

Vast United Corp. owns an agglomeration of investments in power properties scattered all over the East. Formed by the Morgan-Bonbright-Drexel interests in 1929, it marked the return of J. P. Morgan & Co. from pure banking to promotional activities. Because United Corp. does not attempt to influence the operating policies of its affiliated power companies, it is a favorite of utility operating men. But this makes no difference to SEC. For, though power companies require heavy capitalizations that make financiers their logical bosses, SEC believes that systems of operating companies pyramided to a peak in Wall Street offer too many chances for overcapitalization at the expense of stockholder and consumer. This was the basis of the Public Utility Act of 1935, which United and its fellows have fought.

While Electric Bond & Share took the fight to the Supreme Court, only to lose the first round last spring (TIME, April 4), United Corp. tried to persuade SEC to let it reorganize as an investment trust. SEC turned down no less than seven such proposals (TIME, Feb. 7), and after the Supreme Court's decision, United had to register with SEC after all.

Last week it became apparent that United was still looking for a way out. To its stockholders. President George H. Howard sent a letter proposing to write off as market losses $434,130,478 of its $580,049,445 book assets. Announced purpose: to permit the resumption of dividends on United's preferred stock based on the portfolio as revalued by the state of the market last December 31. But President Howard admitted that if stock-holders agreed, the way would then be cleared for sale of enough of United's holdings to reduce its control of any affiliate to less than 10%.* This would automatically change it by the terms of the Public Utility Act from a holding company to an investment trust and SEC no longer could rule its investment policy.

How United's stockholders were likely to vote was immediately indicated by the stock market. Same day the letter went out, United Corp. common was the most active security on the Big Board, rose from $3.12 to $3.50 on a turnover of 44,000 shares, while the preferred rose from $30.75 to $32.25 on a turnover of 5,600 shares.

*United could, of course, sell its securities now, but at the high values at which it is now carrying them on its books this would mean huge paper losses which would have to be charged against surplus, preventing payment of dividends.

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