It was a “once in a lifetime” opportunity, the advertisements said. He took out full-page advertisements in newspapers throughout the country offering to sell the stock privately at $55 a share. He came up with a neat solution: He would sell some shares directly to the public at a fixed price, evading the stock exchange altogether. But if he started selling his stock on the exchange to realize his profits, the price of the stock would drop, loosening his grip on the short sellers. On paper, his shares were worth much more than the $10 million he had borrowed.
As John Brooks noted, Saunders was “a newcomer to Wall Street, a country boy setting out defiantly, amid the cheers of a good part of rural America, to lay the slick manipulators of New York by the heels.”Īround the same time that Saunders was fending off inquiries from the New York Stock Exchange, he faced another problem. Saunders couldn’t have been more different from those men. But corners usually involved financiers with close ties to Wall Street, like Cornelius Vanderbilt, J.P. Just two years earlier, Wall Street had seen a corner in the stock of a car company.
At the time, there were no federal securities laws against market manipulation, and corners were not unheard-of. Since Saunders owned nearly all Piggly Wiggly stock, the short sellers would have to buy from him and he could name his price. It soon dawned on Wall Street that Saunders was trying to corner the market so that he could squeeze the short sellers, who would be forced to buy high and therefore take a big loss. Having fallen as low as $39, it rose to nearly $60 by the end of 1922, and it kept going. The New York Daily News warned Wall Street to “put locks on safes” because “Clarence is here with the open and avowed purpose of teaching New York the financial game.” By March 1923, Saunders controlled more than 198,000 shares, or 99 percent of all Piggly Wiggly stock.Īll this buying inevitably pushed the stock price up. In late 1922, newspapers reported that Saunders and four armed guards had arrived in New York on a private train from Memphis, carrying suitcases stuffed with a million dollars. Within a week, he had scooped up more than 100,000 of the 200,000 outstanding shares of Piggly Wiggly. He took out a loan for $10 million (about $150 million today) and went on a buying spree. It didn’t deter him that, aside from his existing holdings of Piggly Wiggly stock, he had never before traded a single share of any stock on the New York Stock Exchange. He decided that he would “break Wall Street” by buying Piggly Wiggly stock and driving the price back up.
In recounting this episode, I’ve drawn from that book as well as contemporaneous newspaper and magazine accounts.) Wall Street was swooping down on Piggly Wiggly “like an eagle on a chicken,” Saunders thought. (John Brooks tells the story of Saunders’ battle with the short sellers in his book Business Adventures: Twelve Classic Tales From the World of Wall Street. When Saunders learned about these short sellers, he was livid. Although this was no fault of Saunders’ or his company’s, some big Wall Street traders sensed that the stock might be vulnerable and that they could make a tidy profit by selling it short-that is, by borrowing shares to sell high, rebuying them when the stock dropped, and pocketing the difference when they returned them. But in the fall of 1922, several independent franchises in New York, Connecticut, and New Jersey went bankrupt. With steady revenues and rising profits, Piggly Wiggly became a reliable security to own. The success of Piggly Wiggly caught the eye of Wall Street, and in February 1922 the New York Stock Exchange listed its stock for trading.
Saunders named the house “Cla-Le-Clare” after his children, but everyone in Memphis just called it the Pink Palace because of its pink marble facade. Among his purchases was a 160-acre plot of land outside Memphis, where he started building a mansion that was to include a waterfall, a bowling alley, and an 18-hole golf course with one hole located on its own island. And when it came to spending his money, Saunders had opulent tastes. As Piggly Wiggly expanded, Saunders became rich.
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