The Big Tip

"Wall Streeters are cocking an orb," wrote Walter Winchell last week, "at a stock . . . which sells for less than $1 the share ... It peddled over 100,000 shares last week. Big tip .. . Utility." The Street had no trouble identifying the stock as National Power & Light, which in the last ten days had suddenly become one of the most active on the big board. After Winchell's tip the stock soared. In one day, heavy buying sent it from 94-c-a share to $1.25, a rise of 33%.

Then Winchell, who may have heard Wall Street gossip that the Securities & Exchange Commission was looking into the tips on N.P. & L., carefully denied that he had intended to tip anyone. In fact, he said, he had gotten his dope out of a broker's letter reporting that Walter Mack, onetime boss of Pepsi-Cola, "was trying to buy control of N.P. & L. to be used as distributor for a new soft drink firm."

Next day Walter Mack made everything clear. He announced that Phoenix Industries Corp., a Manhattan capital venture company of which he is now president and a substantial stockholder, had bought 90% control of Nedick's, Inc., which has a chain of 96 hot dog and orange drink stands, a gross of $10 million a year. Cost: $3,700,000. Mack also wanted to buy the controlling interest in National Power & Light, held by Electric Bond & Share, for roughly $1,000,000. He wanted to turn Nedick's management over to N.P. & L. and change the name to National Phoenix Industries, Inc. This deal would give him control over N.P. & L.'s assets ($2,000,000 in cash) and enable him to get a Stock Exchange listing for the combine quickly and without the usual time and expense.

The contract was all signed, Mack told SEC. All he needed was SEC approval. (Since SEC had ordered Electric Bond & Share to get rid of N.P. & L. under the Public Utility Holding Company Act, chances were good that SEC would approve.) While he was in a buying mood, Mack also made an offer to individual holders of N.P. & L. stock. He would buy their stock at 45^ a share (10-c- more than its book value). That was the price he was paying Electric Bond & Share for its holdings. Thus, those who had rushed to buy on Winchell's big tip had paid almost three times as much as Mack thought the stock was worth.

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