Stock certificates are a legal document that represents ownership of shares in a corporation. A certificate confirms the number of shares held and the corresponding share of a company. The first share certificates were created in the early 1600s as a way to group many investors into a project. In essence, the first corporations, the share certificates were given to investors who put their money in the investment capital of the group. Many of the first experimental companies were created in order to use investment capital to build bridges and roads. With the growth of financial markets, the privileges and rights granted to certificate holders have changed over the years.
The Dutch East India Company is the very first case in which share certificates were issued and used to represent a property of the company. In 1602, the general states of the Netherlands issued a royal charter to establish 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 were issued paper certificates as proof of ownership of their shares. This is the first recorded example of stock certificates issued to investors. Investors were able to trade their shares on the Amsterdam Stock Exchange, another major breakthrough in the history of financial markets.
After the revolutionary invention of the Dutch East India Company, the share certificate as a currency for holding shares began to grow. By the end of the 18th century, the trading of share certificates as a means of exchanging ownership in companies had grown exponentially. Until then, there were three types of certificates used: bonds, which were certificates that represented investments in government debt; bank stock; and the company’s stock. In 1792, the New York Stock Exchange was created to meet the high demand of investors for a centralized trading location. The NYSE has brought greater transparency in pricing and liquidity to investors.
The growth of financial markets at this time has been widely documented. The NYSE has grown from being a local stock exchange under a tree to the highest level of financial trading in the world. Billions change every day. Stock market growth was a byproduct of US industrialization. Railroad companies issued stock certificates for which there was huge demand in the 1830s. This catapulted stock market activities to the center of American life. The financial industry of the 1830s will shape America’s innovation and entrepreneurship.
Although America’s economic expansion, the stock certificate was a national symbol. It symbolized for America the usual achievement in creating a larger place. The certificates themselves often had and still have eagles and printed flags. With the exponential of the American economy, all industries have benefited from capital investments from investors by invention, such as: aerospace industry, mining industry, railway industry, telecommunications industry, among many others. Paper certificates are now seen unusually in the broker’s offices, it is a declining invention. Its replacement is electronic alternatives that represent the shareholder that offers extra comfort, ease and cost-effectiveness that paper counterparts offer.
Despite his interest in paper certificates among many, he remains considerable. Scripofilie, the hobby of collecting old certificates, has grown in recent years. Today, paper stocks are considered valuable both historically and as collectibles, but in most cases they are inconvenient in modern times. It is quite obvious that the stock certificate has been an extraordinary innovation and has influenced the financial markets and the world in so many ways.