For the money it receives it will issue securities, upon incorporation and legal organization, almost invariably in the form of capital stock and of mortgage-bonds. The stock will probably be held by the men who wish to control the construction and the operation of the line; the bonds will be issued to those persons who invest their money in it, either for profit or as an aid to the community it seeks to enter. The bonds are, in almost all cases, the preferable security. They pay a guaranteed interest at a certain rate, and at the end of a designated term of years they are redeemable at face value, in cash or in the capital stock of the company. There are other forms of loan obligations which the railroad issues--debenture bonds, second-mortgage bonds, short-term notes, and the like. To enter upon a description of these would mean a detour into the devious highways and byways of railroad finance--an excursion which we have no desire to make in this book.
In building our line we will issue as few bonds in proportion to our stock as will make our company fairly stable in organization, and its proposition attractive to investors. For we shall have to pay our interest coupons upon the bonds from the beginning. We can begin even moderate dividends upon our stock after our enterprise has entered upon fair sailing. The all-important initial problem of financing having been at least partly settled, we will go before the Legislature and secure a charter for our road. In these modern days we shall probably have also to make application to some State railroad or public utility commission. It will consider our case with great care, granting hearings so that we may state our plans, and that folk living in the territory which we are about to tap may urge the necessity of our coming, and that rival railroads or other opponents may state their objections. After the entire evidence has been sifted down and weighed in truly judicial fashion, we may hope for word to "go ahead," from the official commission, which, though it assumes none of our risk of loss in projecting the line, will gratuitously assume many of the details of its management.
Perhaps the politicians will poke their noses into our plan; they sometimes do. If we have plenty of capital behind us; if it becomes rumored that the P---- or the N---- or the X----, one of the big existing properties, is back of us, or some "big Wall Street fellow" is guiding our bonds, we can almost confidently expect their interference. After that it becomes a matter of diplomacy--and may the best man win!