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New Feature article,  

ROY C MEGARGEL & MEGARGEL, TEXAS & THE BIRTHPLACE OF PEPSI! NEW BERN NC

 


WELCOME

 

ROY C MEGARGEL

 

I had long thought that Roy C Megargel the Wall Street Investment Banker and 2nd owner of Pepsi-Cola, just might also be the Roy C Megargel , Railroad Tycoon, President of the GULF, TEXAS AND WESTERN RAILROAD.   After several years I finally stumbled across a copy of “Twelve Full Ounces” by Milward W Martin who had been Head of the Pepsi’s legal Dept for 25 years and author of “Was Shakespeare Shakespeare? A Lawyer reviews the evidence”.  Finally there it was...  the confirmation I had been looking for, as I read I discovered there was more to Roy Chester Megargel than the footnote history assigned to him. 

In 1922 owner, manufacturer and creator of Pepsi-Cola, Caleb Bradham and his stockholders entered a reorganization agreement with the Wall Street firm of R.C. Megargel & Co, 27 Pine St, New York City.  However the deal never quite worked out, they simply couldn’t generate the stock sales needed to save the company.   By spring of 1923 Pepsi Cola was bankrupt.

Roy C. Megargel on the other hand, was not willing to let it go, he believed in Bradham’s dream and purchased for $35,000 the Pepsi Cola trademark and business under his newly created Pepsi Cola Corporation.  Pepsi had always been manufactured in New Bern N.C.  Megargel’s first order of business was to move his operation to a warehouse at 1224 West Broad Street, Richmond Virginia. For the next eight years from 1923 to 1931 the concentrate was manufactured Richmond as he struggled to keep the Pepsi name alive. 

As a younger man Megargel during his railroad days he had been involved in the financing and building of the GULF, TEXAS AND WESTERN RAILROAD.   AT heart he was basically a finance man, a successful Wall Street Invest Banker.  Sadly, what he lacked was marketing skill.  He invested substantial sums of money, but without the volume sales and no advertising,   the operation floundered, in fact from 1923 to 1928 the corporation lost money every year.  Roy C Megargel covered the corporations deficit’s out of his own personal funds.  In 1928 he restructured again, this time under the “National Pepsi Cola Corporation” In hopes of boosting the sakes of stock shares;  some of the stock sold but not nearly enough.  Not able to generate the funds he needed, Megargel continued as he been, making up for loses out of his own pocket.

 The stock market crash of 1929 left Megargel unable to continue in his role of Pepsi’s savior by covering losses for the corporation as he had been doing.  By 1931 the Corporation owed 16,000 in unpaid taxes, over $52,000 to Megargel’s personal account and yet another $50,000 to other creditors, it was the end.

On June 8, 1931, in the United States District Court for the Eastern District of Virginia, National Pepsi-Cola Corporation was bankrupt for the second time in the company’s history.

Even that was not enough to stop Roy Megargel, he went out and found Pepsi’s next owner Mr Charles Guth and helped him to broker the deal.  Pepsi-Cola would live but under a new roof.  The new Pepsi Cola Company would be set up under Delaware law with 300,000 shares, with 100,000 of the shares going to Megargel, along with a $25,000 annual royalty.  However, By 1933 he had still never been paid a royalty.  He sued for $11,000 in back royalties even though it was clear he was owed much closer to $70,000.  Roy also knew that $11,000 was all the market would bear and even that might put the company close to bankruptcy again.  They never made it to trial.  Guth made a counter offer to settle out of court for $35,000 then the bomb dropped, he would have to return his remaining stock and sign legal releases from all claims.  .

Even though after his bankruptcy had no obligation, out of his 100,000 shares of the new company stock, he had given away 2,500 shares to investors of his old “National Pepsi Cola Corporation” on a “share for share” basis.  Of the 97,000 shares left he registered 50,000 shares in his wife’s name and a additional 2,500 shares in his brother’s name. 

Guth wanted those 97,000 shares and so Roy signed over his all his stock and signed the release to all claims against the company.  Guth had won…  Except, it was later discovered that no one had ever asked for or offered a release signed for by either Roy’s wife or brother. 

Roy C Megargel was obviously a man of great vision, and integrity.  Without his efforts it’s doubtful the Pepsi Cola name could have survived those eight dark years.  He kept his faith in a product that bled his pockets year after year.  But he stayed true to his belief, stayed true to his investors, and ultimately stayed to true to both his and Caleb Bradham’s dream.

Roy died at the age of 58 at Doctors Hospital, New York on June 15th 1935.  His widow was Margery Knowles of Richmond Va whom he had married in 1909.  He was also survived by his brother Ralph G. Megargel.  Roy Megargel was a native of Scranton Pa and graduated from the University of Michigan in 1901.  Additionally he had been president of the Southern NY Power and Railway Company and a director of the Andes Power Corporation.  He was a member of the Beta Theta Pi fraternity and had belonged to the Lawyers Club and St Nicholas Society.  

Roy's brother, Ralph G. Megargel passed on 4 months later in Oct of 1935. Ralph left behind a son named after Roy.   Roy C Megargel 2nd.  He graduated Dartmouth College in 1952 and went on to be the vice president of the Hewitt-Robins division of Litton Industries. 

It was reported in the New York Times on Oct 29th 1939 that Margery K Megargel, widow of Roy C Megargel was paid $240,000 in a settlement.  It was alleged she had been defrauded of 95,000 shares of Pepsi-Cola stock.  It appears the Margery's brother Irving C Knowles may have settled as well.

What I have not to mentioned is there exists a North Texas town named for Roy C Megargel and still bears his name, Megargel Texas.  I hope this will be a fitting tribute to a little known figure in Pepsi’s history.   Thanks Roy!

 

PART 2

 ROY'S LEGACY, MEGARGEL TEXAS

 

 



 

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