PM's First $1,500,000

Last week the stockholders of the afternoon tabloid PM, which last June set out to crash New York City's big-time circle of newspapers, received copies of a letter. It began "Dear Sirs: I intend to form a corporation under the laws of the State of New York . . ." and it concluded "Very truly yours, Marshall Field." The letter punctuated a fact which PM's directors had already faced: that after about three months of publication PM had run completely through--and come out the other side of--the $1,500,000 cash which 18 stockholders had put up to found it.

Actually young PM had not lost money at quite the fabulous rate of $500,000 a month. $300,000 was spent in promotion which provided the extraordinary build-up with which PM was launched in June. All pre-publication outgo, including nearly $300,000 to enable PM's printer to put in special equipment, the cost of getting a 400-man staff (200 editorial, 200 business) into practice, totaled some $900,000. This left only about $600,000.

Perhaps all this was not gone for good, for--although it did not own its printing plant, or a large inventory of paper--PM still claimed to have substantial noncash assets. But its payroll ran $25,000 a week and its actual operating losses were larger. Its circulation, in the neighborhood of 70,000 newsstand sales and 30,000 copies delivered by mail (presumably trial subscriptions), was still far from the breakeven point.

All this did not bring PM to the end of its tether, for Publisher Ralph McAllister Ingersoll, who promoted and managed the paper from the beginning, had provided it with a group of stockholders with exceedingly viable bank accounts. Nor were these losses a great tragedy to the stockholders, for most of them were people who could afford to own yachts, who regarded playing angel to a newspaper as one of the better ways of living up to their social responsibilities.

Leading among these 18 original godparents were:

>> Sears, Roebuck Heiress Mrs. Marion Rosenwald Stern (represented on PM's board by her man-of-business Nathan Levin who runs the 70-odd Rosenwald family money pools), buyer of PM's No. 1 block of stock, representing a $250,000 investment.

>> Marshall Field III, one of the U. S.'s richest men, who at 47 years of age has been well psychoanalyzed and emerged with a desire to do good in the world.

>> Socialite Jock Whitney, who not only likes to hit the jackpot but invest his money to do good.

>> Smooth Bill Benton who became a millionaire in advertising (Benton & Bowles) before he was 40 and retired to become vice president of Chicago University.

>> Amateur Economist Harry Scherman, president of Book-of-the-Month Club.

When the bad news about PM's condition was broken to the directors, PM counsel advised them that although there was still some cash in the till, the payroll could not legally be met because of other obligations. Naturally there was an explosion. But Director Marshall Field was not dismayed. He had faith that PM would eventually succeed, that it would eventually do great good in the world. He offered to take over the paper. Instead, temporary advances were arranged to keep it going while other directors scurried around looking for alternatives.

They did not find any that were satisfactory. So last week Marshall Field's plan to become PM's sole and all-controlling angel was submitted to the stockholders. It provided that: 1) he will form a new company to take over all PM's assets and obligations; 2) he will put up $300,000 to pay back the original stockholders 20-c- on the dollar; 3) in addition he will provide, for distribution to the old stockholders, a special Class B common stock entitled to a 15% equity in the new company; 4) he will lend the new company at least $500,000 additional capital (including his recent advances) and buy its voting stock at 10-c- a share.

One old PM obligation which Marshall Field did not offer to assume was Ralph Ingersoll's five-year contract which gave him the reins for five years. But Marshall Field was in full agreement with Publisher Ingersoll, indicated he expected to keep him on and let him acquire some of the new company's stock.

Not downhearted was Ralph Ingersoll. He declared that his circulation was going up, argued that his onetime employer, The New Yorker, required some $750,000 capital before it turned the corner, although it had hoped that $100,000 would be enough (but The New Yorker did not go through reorganization). Having failed with $1,500,000, Publisher Ingersoll hoped to turn the corner with $2,000,000 or $2,500,000. Best of all, PM still had a Grade A angel.

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