Stock Certificate

What Is a Stock Certificate?

A stock certificate is a physical piece of paper that represents a shareholder's ownership in a company. Stock certificates include information such as the number of shares owned, the date of purchase, an identification number, usually a corporate seal, and signatures.

The certificates are most often a bit bigger than a normal piece of paper, and most of them have intricate designs to discourage fraudulent replication and counterfeiting, which was a problem for much of the pre-internet history of investing in corporate stocks.

For the first 400-plus years of investing history, participating in an initial public offering (IPO) or buying stock often came with one of these physical stock certificates. The first stock certificate was issued in 1606 by the Dutch East India Company. It was worth 150 Dutch Guilder. The Walt Disney Company issued one of the last paper stock certificates from a major corporation in 2013.

Understanding Stock Certificates

Stocks are the foundation of nearly every portfolio, and they represent partial ownership in a company. Usually, the records of ownership are kept in electronic form, but you can request a paper version.

Each certificate starts as a standard design which might change throughout the years, then the date, identification number, and other information are added. Most signatures of executives are printed on the certificate, but some will be signed with a pen.

Today, securities are recorded almost exclusively electronically using a process known as book-entry form. Electronic methods eliminate the need to issue paper certificates to represent ownership.

With book-entry, ownership of securities is never physically transferred when securities are exchanged; rather, accounting entries are merely changed in the books of the commercial financial institutions where investors maintain accounts. This offers the benefits of any modern electronic record-keeping system.

Stock Certificates Before Electronic Record Keeping

Before electronic record-keeping was available, stock certificates were a unique piece of work in their own right. It was fairly common to receive a stock certificate adorned with fancy designs, ornate engravings, and approaching artwork in and of themselves.

For instance, Disney Corporation would design their stock certificates will full-color illustrations of their popular characters. In turn, parents would often frame a certificate and hang in a child's room as evidence saving for a rainy day works. In a sense, the complex designs found in many earlier stock certificates included what is known today as branding.

You may find an old stock certificate reproduction hanging in your local financial advisor's office today. This signals their long-term approach and commitment to responsible capital stewardship.