Stock certificates are a legal document that represents ownership of shares in a corporation. A certificate confirms the number of shares you own and the corresponding stake of a company. The first share certificates were created in the early 17th century as a way to group many investors in a project. Basically the first corporations, the stock certificates were given to investors who put their money into the group’s investment capital. Many of the first experimental companies were created with the aim of using investment capital to build bridges and roads. With the growth of financial markets, the privileges and rights granted to certificate holders have changed somewhat over the years.
The Dutch East India Company is the first instance in which share certificates were issued and used to represent company ownership. In 1602, the States General of the Netherlands issued a royal charter to found the Dutch East India Company. The Dutch East India Company issued paper shares to its investors in 1606. Investors in the Dutch East India Company received paper certificates as proof of their ownership of shares. This is the first recorded case of share certificates issued to investors. Investors were already able to trade their shares on the original Amsterdam Stock Exchange, another breakthrough in the history of financial markets.
After the revolutionary invention of the Dutch East India Company, the stock certificate as currency for stock ownership began to grow. By the end of the 18th century, the trading of stock certificates as a means of exchanging business ownership was growing exponentially. By then three types of certificates were used: bonds, which were certificates that represented investments in public debt; bank stock; and company shares. In 1792, the New York Stock Exchange was created to satisfy the great demand that investors had for a centralized local business. The New York Stock Exchange provided investors with greater price and liquidity transparency.
The growth of financial markets from this point on has been extensively documented. The NYSE has grown from a local stock exchange under a tree to the world’s largest financial trading floor. Billions are exchanged every day. The growth of the stock markets was a by-product of the industrialization of the United States. Railroad companies issued stock certificates for which there was enormous demand in the 1830s. This catapulted stock market activities to center stage in American life. The financial industry beginning in the 1830s would shape America’s entrepreneurial and innovative spirit.
Although the United States economic expansion, the stock certificate was a national symbol. It symbolized for America their common achievement in creating a greater place. The certificates themselves very often had and still have eagles and flags printed on them. With the exponential of the American economy, all industries have benefited from the capital investment of investors through the invention such as: the aerospace industry, the mining industry, the railway industry, the telecommunications industry among many others. Paper stock certificates are now a rare sight in stockbrokers’ offices, an invention in decline. Its replacement is electronic alternatives that represent share ownership that offer greater convenience, ease and profitability than paper counterparts.
Despite its demise, interest in paper certificates among many remains considerable. Scripphilia, the hobby of collecting old certificates, as it has been cultivated in recent years. Today, paper stocks are considered valuable both historically and collectibles, but in most cases they are inconvenient in modern times. It is quite evident that the share certificate was a great innovation and has influenced the financial markets and the world in many ways.