A stock certificate is a legal document that represents ownership of shares in a corporation. A certificate verifies the number of shares owned and the number of shares held by the company. The first stock certificates were created in the early 1600s as a way to group multiple investors into a single project. Essentially before corporations, stock certificates were given to investors who put their money into the group’s investment capital. Many of the first experimental companies were formed with the goal of using the investment capital to build bridges and roads. With the development of financial markets, the privileges and rights granted to certificate holders have changed over the years.
The Dutch East India Company is the first case where stock certificates were issued and used to represent ownership in the company. In 1602, the States-General of the Netherlands issued a royal charter establishing the Dutch East India Company. The Dutch East India Company issued paper stock to its investors in 1606. Paper certificates were issued to the investors of the Dutch East India Company as proof of their share ownership. This is the first recorded instance of stock certificates being issued to investors. Investors and originators were able to trade their shares on the Amsterdam Stock Exchange, another major advance in the history of financial markets.
Stock certificates began to proliferate after the revolutionary invention of the Dutch East India Company as a form of currency for share ownership. By the end of the 18th century, trading stock certificates as a means of exchanging ownership in companies was increasing rapidly. Until then three types of certificates were in use: bonds, which were certificates representing investments in government debt; bank stock; and company stock. The New York Stock Exchange was created in 1792 to meet the great demand that investors had for a centralized trading location. The NYSE brought more transparency in pricing and liquidity to investors.
The development of financial markets from this point has been extensively documented. The NYSE has grown from a local exchange under a tree to the world’s largest financial trading floor. Billions are exchanged every day. The growth of stock exchanges was a by-product of the industrialization of the United States. Railroad companies issued certificates of stock for which there was a high demand in the 1830s. It propelled the activities of the stock market to the center stage of American life. From the 1830s the financial industry would form America’s spirit of innovation and entrepreneurship.
Although America’s economic expansion the stock certificate was a national symbol. It is a symbol of his general achievement in making America a greater place. The certificates themselves were often and still bear eagles and flags. With the exponential growth of America’s economy, all industries have benefited from capital investment from investors through invention such as: aerospace industry, mining industry, rail industry, telecommunication industry and many more. Paper stock certificates are now an uncommon sight in stockbroker’s offices, a dwindling invention. Its replacements are electronic options that represent share ownership that provide added convenience, ease, and cost-effectiveness when compared to paper counterparts.
Despite its demise, interest in paper certificates remains considerable among many people. Scripophilia, the hobby of collecting old certificates, as it has grown over the years. Today paper stock is valued both historically and as a collectible, but in most cases they are inconvenient in modern times. It is quite clear that the stock certificate was a tremendous innovation and has impacted the financial markets and the world in many ways.
