IRAN ART EXHIBITION: WHAT DO YOU KNOW ABOUT STOCK CERTIFICATES?
Trading stocks on a smartphone app or using an online brokerage has become second nature for investors today. But not so long ago, the process of investing in stocks worked very differently.
Before the rise of the internet and online trading, companies used to issue physical stock certificates. Stock certificates were how shareholders would prove their ownership of stock.
Understanding Stock Certificates
In the past, buying and selling shares of stock took place over the phone or in person, without the involvement of any computerized trading systems, let alone the internet. You’d call up your broker and tell him to buy 100 shares of such and such a company.
Trading commissions were very expensive, and once a stock purchase transaction went through, you’d get a stock certificate. These paper documents were issued by companies to their shareholders as proof that they owned shares of stock.
These certificates included vital information such as:
• The shareholder’s name
• Date of purchase
• Number of shares owned
• Type of stock owned
• CUSIP, a unique number used to identify the purchase transaction
• Signature of the representative authorized to issue the share certificate
IRAN ART EXHIBITION: Before digital transaction records became mainstream, stock certificates were the only proof investors had of stock ownership.
If an investor wanted to sell their shares, they would have to present their share certificates to a stock broker. The broker would then send the certificates back to the issuing company for sale.
When Were The First Stock Certificates Issued?
Get ready to rewind your time machine—stock certificates have a long history. It’s thought that the first stock certificate was issued by the Dutch East India Company in 1606. In fact, the Amsterdam Stock Exchange was founded in 1602 exclusively to trade stock issued by the East India Company.
What Did Share Certificates Look Like?
Companies tend to get creative when designing stock certificates, so be prepared for some fancy paper. From embossed seals and company logos to detailed illustrations and watermarks, share certificates can be works of art in and of themselves.
Disney stock certificates, for example, are well known for featuring full-color illustrations of some of the brand’s most iconic characters.
Are Stock Certificates Valuable?
IRAN ART EXHIBITION: Despite their highfalutin appearance, a stock certificate’s value depends on the company and the date.
During the Roaring Twenties, prior to the onset of The Great Depression, stock certificates were an incredibly valuable piece of paper to hold. They were physical testaments to an investment in American industry, and investors could use these certificates to pass wealth to family members, or cash-in should times get tough.
However, when the stock market crashed between 1929-1932, stocks lost nearly 90 percent of their value. By 1933, 20,000 U.S. companies went bankrupt, making share certificates from those companies worthless.
Like shares of companies issued digitally today, the value of a share of stock fluctuates and can increase or decrease in value. With share certificates, it’s less about the paper and more about what the shares are worth on the day you wish to sell them.
Do Companies Still Issue Share Certificates?
Yes but they’re becoming harder to come by, and often have substantial costs to deter requests.
As the investing world shifted towards a digital recordkeeping system for trades, companies have gradually ceased offering stock certificates. Despite their frameable appearance, even Disney stopped issuing stock certificates in 2013 and switched to digital ownership tracking.
How Do You Get a Share Certificate?
In some cases it’s still possible to obtain a physical share certificate for stock you own. First, you’ll need a company that still issues stock certificates. Then, you’ll have to ask if the pros and cons of the stock certificate ownership route fit your needs.
IRAN ART EXHIBITION: For companies still issuing paper stock certificates, there are two ways to get a share certificate: through the broker you purchased the stock from, or directly from the transfer agent.
Brokers
Brokers have all the purchase records needed to secure a share certificate on your behalf. You can reach out to the broker through the customer service department and ask what steps you need to take to trade your digital shares of a company for paper stock certificates.
Be prepared to pay for the pleasure, however. It’s not uncommon to be met with fees up to $500 per certificate, a fee that’s mostly a deterrent to incentivize investors to keep their shares registered digitally.
Transfer Agents for Existing Shareholders
The most direct route to get a share certificate is to contact the transfer agent for the stock. You can find a stock’s transfer agent listed on the investor relations tab of the company’s website, or by calling the investor relations department directly.
IRAN ART EXHIBITION: Once you have contact info for the transfer agent, you can then reach out to them to understand the process and fees to exchange your digitally-issued shares for paper stock certificates.
Transfer Agents for New Shareholders
If you don’t already own shares of stock in a company you’d like to get a stock certificate for, you can potentially buy stock through a company’s direct purchase program and request to have physical share certificates issued after the purchase.
While this isn’t an option for very many public companies, you can always contact the transfer agent prior to purchase to clarify whether they’re able to issue share certificates to shareholders, along with the process for receiving dividends and redeeming those certificates when you’re ready to sell.
What Should You Do With Old Share Certificates?
If you come across stock certificates in a relative’s attic or see them for sale at an antique shop, they may very well have value as collectibles—and sometimes may even still be valid.
You can research the company name and find out whether it’s still in business. If it is, then you can contact the investor relations department to help determine if the stock certificates are still valid and what their value might be.
IRAN ART EXHIBITION: Note that in most cases, stock certificates have most likely already been exchanged for electronically stored shares.
If the company is a bit harder to track down, you can see if your online brokerage can track down the company for you using the certificate’s CUSIP. The CUSIP is akin to a share’s genetic code and records all the information about the trade.
Online brokerages often offer their customers research capabilities into old stock certificates—likely with the hope that their customers will then transfer those assets into their brokerage accounts.
If the certificate doesn’t have market value, the company could be interested in purchasing it as a collectible. Yes, there’s an entire world of people who collect old stock certificates. The practice is called scripophily.
