Something for Nothing

Juan Trippe's high-flying Pan American Airways last week charted a new course in high finance. Juan Trippe wanted at least $25,000,000 in the next six months to spend on new super-airliners for postwar flying. He was willing to issue more of Pan Am's common stock to raise the money. But he did not want to pay the underwriter's fee for selling the stock, roughly $1,000,000 on a $25,000,000 issue. So he sat down with his old friend, Floyd B. Odium, boss of risk-taking Atlas Corp., who has long hankered to invest more of his corporation's idle cash in airlines. They worked out an unorthodox deal by which 1) Trippe will get his $25,000,000; 2) Odium will get his chance to invest--but no underwriter's fee.

Under the deal, Pan Am expects to split its 1,993,261 shares of common stock, two shares for one. Then, before June, it plans to offer stockholders the right to buy one share of stock near the market price for each two shares held, give them a warrant (option) to buy another share any time before Dec. 31, 1947.

On his part, Odium will underwrite the sale of $25,000,000 worth of the new stock--i.e., Atlas will buy any stock, up to this sum, which Pan Am's stockholders do not. In return, Atlas gets an option at $18 on 500,000 shares, hopes the market price of Pan Am stock will rise before the end of December 1947. But Trippe, jealous of his tight control of Pan Am, has shrewdly specified that Atlas can hold permanently only 200,000 shares, must resell the rest. In all. Pan Am expects to need $100,000,000. But Trippe will get the rest of this in orthodox fashion, that is, through offerings of preferred stock or equipment trusts. He wall probably have little trouble. Last week, the Bankers Trust Co., the Mutual Life Insurance Co., the Chase National Bank and the New York Trust Co. joined in a program to make easier any postwar financing the airlines need--an estimated $500,000,000.

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