Define Stock Certificate

What's the purpose of certificates?

In the days before computers, people who bought stocks of a company received stock certificates (also called share certificates) -- physical pieces of paper stating that they owned a certain number of shares in the company. They were signed, legal documents like a deed to a home, which often ended up tucked away with other paperwork and could be lost or destroyed.

Determining Ownership

Who owns the stock?

When securities are bought or sold, the name that appears on the certificate is usually the broker's name rather than the the buyer. Such stocks are held "in street name." And the broker typically holds the stocks in electronic form, not as paper certificates. This makes it easier for the broker to execute transactions when shares are bought and sold. There is no need to change the owner's name on the certificates and trades settle more quickly.

Establishing Authenticity

Is it real?

If an old stock certificate turns up among some musty papers, first determine if it is authentic. Look for the name of the company and its place of incorporation, which should be printed on each certificate. It also should state the number of shares it represents, and it should have a "CUSIP" number (an acronym for the Committee on Uniform Security Identification Procedures). This number is re-issued every time there is a split in shares, merger, name change or other corporate move. The CUSIP number is a kind of corporate DNA.

Calculating Market Value

What's it worth?

The value of each share of a publicly traded company is listed in the stock section of major daily newspapers, unless the company is very small or infrequently traded. There are too many companies for papers to cover on a daily basis. Small companies that trade infrequently might trade on the over-the-counter (OTC) markets and might be listed on the Pink Sheets. To calculate the current market value of shares, multiply the listed value per share by the number of shares on the certificate.

Scripophily

A collector's item?

The certificates themselves might have value as collectibles, depending upon their historical significance, condition, the quality of the engraving and its rarity. "Scripophily" is the term given to the hobby of collecting old stock and bond certificates. Although not as widely known, it is a pastime much like stamp collecting. Companies that buy and sell certificates as collectibles include Scripophily.com, realstockcertificates.com, oldstocks.com (both of which trade in antique certificates) and psta.com, the official website of the Professional Scripophily Traders Association (PSTA).

Stock Certificates as Gifts

A gift that grows?

The idea of gifting shares has long been popular, but the cost for brokers to sell one or two shares of stock is the same as selling a large block, with less profit. In 1996, one broker with an idea formed OneShare.com, making it easy to buy a single share of more than 200 viable companies. Buyers receive a real certificate, framed and matted. One of the company's most often requested certificates is for Disney stock, featuring an engraved portrait of Walt Disney surrounded by some of his famous cartoon characters. Also check out giveashare.com, uniquestockgift.com or firstshare.com.

References

• U.S. Securities and Exchange Commission: "Stock and Bond Certificates, Old"
• Old Stocks: Collectible Stocks and Bonds
• One Share