United Copper

Last updated
United Copper
TypePublic (trade on the curb)
Industry Copper mining
Founded1902
Defunct1913
FatePlaced in receivership
HeadquartersIncorporated in New Jersey [1]
Key people
F. Augustus Heinze

The United Copper Company was a short-lived United States copper mining business in the early 20th century that played a pivotal role in the Panic of 1907.

United Copper was incorporated in 1902 by F. Augustus Heinze, a copper magnate who had tussled for years with Amalgamated Copper for lucrative copper mines in Butte, Montana. The firm was incorporated in New Jersey with an authorized capital of US$80,000,000. United Copper combined Heinze interests in The Montana Ore Purchasing Company, The Nipper Consolidated Copper Company, The Minnie Healy Mining Company, The Corra Rock-Island Mining Company, and The Belmont Mining Company. [1]

Upon consolidation, United Copper was capable of producing about 42 million pounds (19 thousand metric tons) of copper a year, as compared to 143 million pounds (65 thousand metric tons) per year for Amalgamated Copper. [1]

United Copper was literally traded "on the curb" outside the New York Stock Exchange (NYSE). "On the curb" trading was later formalized as the American Stock Exchange (AMEX).

In 1907, after its legal battles with Amalgamated had finally been settled, [2] United Copper again found itself the center of a scandal: in October, F. Augustus Heinze's brother, Otto Heinze, devised a scheme to corner the market in United Copper stock. The Heinzes owned a large share of the company and Otto believed that many of these shares had been loaned out to investors hoping to short sell the stock.

Short sellers borrow, or make arrangements to borrow, the stock of a company, which they then sell at current prices. If prices later drop, they repurchase shares of the company, now at a cheaper price, to replace the borrowed stock. The difference is the profit of the short seller. Heinze's plan was to move aggressively to purchase the stock of United Copper. The price would soar high. Then, with prices high, and Heinze controlling most of the stock, he would force the short-sellers to repay the borrowed stock, a move called a "short squeeze." The short-sellers would have no option but to settle with Heinze for high prices.

But Otto Heinze overestimated how much of the company the family controlled (cf: family business). When he forced the borrowers to buy back stock they were able to get it from other sources. When the market realized his corner had failed, the stock price of United Copper collapsed. So shocking was the collapse, that depositors rushed to pull the money out of the banks of F. Augustus Heinze. From there panic spread, as people pulled money out of banks associated with Heinze, and then from trust companies associated with those banks (see Panic of 1907).

In 1908, F. Augustus Heinze was indicted for his role in the corner. [3] The share price of United Copper, meanwhile, never recovered. In 1913 the company was placed into receivership, so its assets could be unwound. [4] [5]

Related Research Articles

<span class="mw-page-title-main">NYSE American</span> Stock exchange located in New York City

NYSE American, formerly known as the American Stock Exchange (AMEX), and more recently as NYSE MKT, is an American stock exchange situated in New York City. AMEX was previously a mutual organization, owned by its members. Until 1953, it was known as the New York Curb Exchange.

<span class="mw-page-title-main">Stock market crash</span> Sudden widespread decline of stock prices

A stock market crash is a sudden dramatic decline of stock prices across a major cross-section of a stock market, resulting in a significant loss of paper wealth. Crashes are driven by panic selling and underlying economic factors. They often follow speculation and economic bubbles.

<span class="mw-page-title-main">Short (finance)</span> Practice of selling securities or other financial instruments that are not currently owned

In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional "long" position, where the investor will profit if the value of the asset rises.

<span class="mw-page-title-main">William Rockefeller Jr.</span> American businessman and financier (1841-1922)

William Avery Rockefeller Jr. was an American businessman and financier. Rockefeller was a co-founder of Standard Oil along with his elder brother John Davison Rockefeller. He was also part owner of the Anaconda Copper Company, which was the fourth-largest company in the world in the late 1920s. Rockefeller started his business career as a clerk at 16. In 1867, he joined his brother's company, Rockefeller, Andrews & Flagler, which later became Standard Oil. The company was eventually split up by the Supreme Court in 1911. Rockefeller also had a significant involvement in the copper industry. In 1899, Rockefeller and Standard Oil principal Henry H. Rogers formed the Amalgamated Copper Mining Company, which later became the Anaconda Copper Company, a global industry leader.

<span class="mw-page-title-main">Short squeeze</span> Rapid increase in the price of a stock owing primarily to technical factors

In the stock market, a short squeeze is a rapid increase in the price of a stock owing primarily to an excess of short selling of a stock rather than underlying fundamentals. A short squeeze occurs when there is a lack of supply and an excess of demand for the stock due to short sellers having to buy stocks to cover their short positions.

<span class="mw-page-title-main">Panic of 1907</span> Three-week financial crisis in the United States

The Panic of 1907, also known as the 1907 Bankers' Panic or Knickerbocker Crisis, was a financial crisis that took place in the United States over a three-week period starting in mid-October, when the New York Stock Exchange fell almost 50% from its peak the previous year. The panic occurred during a time of economic recession, and there were numerous runs on banks and on trust companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered bankruptcy. The primary causes of the run included a retraction of market liquidity by a number of New York City banks and a loss of confidence among depositors, exacerbated by unregulated side bets at bucket shops.

<span class="mw-page-title-main">Anaconda Copper Mine (Montana)</span> Copper mine in Butte, Montana, US

The Anaconda Copper Mine was a large copper mine in Butte, Montana that closed operations in 1947 and was eventually consumed by the Berkeley Pit, a vast open-pit mine. Originally a silver mine, it was bought for $30,000 in 1881 by an Irish immigrant named Marcus Daly from Michael Hickey, a Civil War veteran, and co-owner Charles X. Larabie. From this beginning Daly, along with partners George Hearst, James Ben Ali Haggin and Lloyd Tevis, created the Anaconda Copper Mining Company, which ultimately became a global mining enterprise that would go on to mine 18 billion pounds of copper over 100 years. At the height of The Anaconda Copper Mining Company, it consisted of the Anaconda and other Butte mines, a smelter at Anaconda, Montana, processing plants in Great Falls, Montana, the American Brass Company, and many other properties spanning multiple countries.

<span class="mw-page-title-main">Copper Kings</span> Trio of American industrialists

The Copper Kings were the three industrialists Marcus Daly, William A. Clark, and F. Augustus Heinze. They were known for the epic battles fought in Butte, Montana, and the surrounding region, during the Gilded Age, over control of the local copper mining industry, the fight that had ramifications for not only Montana, but the United States as a whole.

<span class="mw-page-title-main">Knickerbocker Trust Company</span> Defunct bank based in New York City, United States (1884–1912)

The Knickerbocker Trust was a bank based in New York City that was, at one time, among the largest banks in the United States. It was a central player in the Panic of 1907.

<span class="mw-page-title-main">F. Augustus Heinze</span> American mining magnate (1869–1914)

Frederick "Fritz" Augustus Heinze was an American businessman, known as one of the three Copper Kings of Butte, Montana, along with William Andrews Clark and Marcus Daly. He was an intelligent, charismatic and devious character, but was also seen as a hero especially by many of the citizens of Montana.

<span class="mw-page-title-main">Naked short selling</span> Short-selling practice

Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing the asset from someone else or ensuring that it can be borrowed. When the seller does not obtain the asset and deliver it to the buyer within the required time frame, the result is known as a "failure to deliver" (FTD). The transaction generally remains open until the asset is acquired and delivered by the seller, or the seller's broker settles the trade on their behalf.

The Anaconda Copper Mining Company, known as the Amalgamated Copper Company between 1899 and 1915, was an American mining company headquartered in Butte, Montana. It was one of the largest trusts of the early 20th century and one of the largest mining companies in the world for much of the 20th century.

The Panic of 1901 was the first stock market crash on the New York Stock Exchange, caused in part by struggles between E. H. Harriman, Jacob Schiff, and J. P. Morgan/James J. Hill for the financial control of the Northern Pacific Railway. The stock cornering was orchestrated by James Stillman and William Rockefeller's First National City Bank financed with Standard Oil money. After reaching a compromise, the moguls formed the Northern Securities Company. As a result of the panic, thousands of small investors were ruined.

<span class="mw-page-title-main">Thomas W. Lawson (businessman)</span> American writer and businessman

Thomas William Lawson was an American businessman and writer. A highly controversial Boston stock promoter, he is known for both his efforts to promote reforms in the stock markets and the fortune he amassed for himself through highly dubious stock manipulations.

<span class="mw-page-title-main">Charles T. Barney</span>

Charles Tracy Barney was an American banker who was the president of the Knickerbocker Trust Company, the collapse of which shortly before Barney's death sparked the Panic of 1907.

<span class="mw-page-title-main">Charles W. Morse</span> American businessman

Charles Wyman Morse was an American businessman and speculator who committed frauds and engaged in corrupt business practices. At one time he controlled 13 banks. Known as the "Ice King" early in his career out of New York City, through Tammany Hall corruption he established a monopoly in New York's ice business, before buying several shipping companies and moving into high finance. His attempt to manipulate the price of copper-shares set off a wave of selling that developed into the Panic of 1907. Jailed for violating federal banking laws, he faked serious illness and was released. Later he was indicted for war profiteering and fraud.

<span class="mw-page-title-main">John D. Ryan (industrialist)</span> American industrialist and copper mining magnate

John Dennis Ryan was an American industrialist and copper mining magnate. He served as President of the Anaconda Copper Mining Company and was a founder of the Montana Power Company.

<span class="mw-page-title-main">William Cornell Greene</span> American businessman (1852–1911)

Colonel William Cornell Greene was an American businessman who was famous for discovering rich copper reserves in Cananea, Mexico, and for founding the Greene Consolidated Copper Company in 1899. By 1905, Greene was one of the wealthiest businessmen in the world.

The Boston and Montana Consolidated Copper and Silver Mining Company was a mining, smelting, and refining company which operated primarily in the state of Montana in the United States. It was established in 1887 and merged with the Amalgamated Copper Company in 1901. The Amalgamated Copper Company changed its name to Anaconda Copper in 1910, and became one of America's largest corporations. Historian Michael P. Malone has written, "Well financed and well managed, the Boston and Montana came to rank among the world's greatest copper companies."

Edward Mahon (1862–1937) was born in Rawmarsh, England to Sir William Vesey Ross Mahon (1813–1893), who became Fourth Baronet in 1852, but chose not to abandon his Yorkshire parish in favour of Castlegar, the ancestral Mahon family residence in County Galway, Ireland.

References

  1. 1 2 3 "The United Copper Company Incorporated" (PDF). The New York Times . April 29, 1902. Retrieved on September 16, 2008.
  2. "Copper Merger May Get the Rich Clark Mines" (PDF). The New York Times . February 18, 1906. Retrieved on September 16, 2008.
  3. "F.A. Heinze Indicted for Overcertifying" (PDF). The New York Times . January 8, 1908. Retrieved on September 16, 2008.
  4. "United Copper Co. Passes to Receivers" (PDF). The New York Times . February 11, 1913. Retrieved on September 16, 2008.
  5. "Heinze Asks $30 Million; Arthur P. Is Suing Amalgamated and Others for This Amount" (PDF). The New York Times . March 4, 1913. Retrieved on September 16, 2008.