IBM's Bargain Sale

In 1925 International Business Machines Corp. offered its stockholders 10, 046 new shares at $100 v. the market price of $122.75. The company grew so fast that a stockholder who held on to a single 1925 share through IBM's many stock dividends and splits now would own about 65 shares worth $20,109. Last week, floating its first new stock issue in 32 years, IBM again gave stockholders a bargain. IBM offered 1,050,223 additional common shares to its 34,000 holders at the rate of one share for each ten held. Price: $220 a share v. the $332 market close before the offering. The second biggest new stock issue ever underwritten in the U.S. (first: General Motors' $328.5 million sale in 1955), it will raise some $231 million for the world's biggest maker of automatic office equipment.

IBM will use the money to expand its 26 plants around the world and to finance more of the electronic THINK machines that it leases and sells. Stockholders rushed .to snap up the new issue. Those who did not subscribe sold their rights for an average $8.50 each. Thus, for about $85, brokers could get the ten rights needed to buy one new share at $220. Many of these rights were bought by Wall Street's Morgan Stanley & Co., manager of the 255-firm investment syndicate underwriting the issue. Using the rights, Morgan Stanley picked up a block of new stock, put it on the open market; it was promptly oversubscribed.

There were many reasons for the successful sale. IBM's revenues have zoomed 400% in the past ten years, accelerating faster than the sales of its top competitors, Burroughs Corp. and National Cash Register Co. Sales and rentals for the first quarter of 1957 hit $215.7 million v. $155.5 million in January-March of 1956. Wall Street brokers expect IBM's gross income to jump 25% a year for the next five years, as U.S. industry steps up automation, notably in the office, where clerical workers are becoming scarce and more costly.

Another major public financing got started last week. In St. Louis, Southwestern Bell Telephone Co.'s board voted to float $100 million in new debentures to help pay for its fiveyear, $1,125,000,000 expansion program. If stockholders and the Securities and Exchange Commission approve, the issue will be bid for on Oct. 1.

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