Wednesday, August 31, 2016

Walker's Manual of Unlisted Stocks

Some stock certificates are not listed on an official stock exchange, but can still be publicly traded. These are called Unlisted Stocks. These stock certificates are traded off-exchange or over-the-counter (OTC) between two parties without any supervision of an exchange. In the US, OTC trading is carried out by brokers using an electronic service like the OTC Bulletin Board.

The movie The Wolf of Wall Street (2013) is based on the true story of stock-broker Jordan Belfort. In one of the first scenes, we see Belfort, played by Leonardo DiCaprio, working in a small office at a mini-shopping center. The low value stocks, he sells there impressively over the phone, are unlisted stocks.

Walker's Manual of Unlisted Stocks, book cover of the third 1998 edition

Walker's Manuals
Since the early 1900s Walker's manuals have been published for Pacific Coast Securities, California Securities and later also for Western Corporations. The first Walker's Manual of Unlisted Stocks was published in 1996. The book contains profiles of 500 unlisted companies and investment partnerships (funds), traded at or over $5 per share. A similar manual for companies traded under $5 is brought out as the Walker's Manual of Penny Stocks and a special manual exists for unlisted community banks. 

  • Title : Walker's Manual of Unlisted Stocks - 1998 3rd Edition
  • Author : H. K. Eisenberg
  • ID : 0-9652088-6-9, published 1998 by Walkers Manual, LLC
  • Languages : English
  • Number of pages : 526 excluding indexes
  • Images : no images
  • Index : 1. Company name, 2. Geographic area, 3. SIC code (theme). Additional indexes by a number of financial indicators such as total revenue, market capitalization, price/earnings ratio, etc. A separate index is provided for the section of the investment partnerships

Every company profile contains a single paragraph describing the company, a table with the financial indicators over the preceding four years, a comment on the company's evolution, and an overview of its officers. Both new and long existing businesses are included from all economic sectors. 

Rochester and Pittsburgh Coal Company
Stock certificate for common shares, issued 1985
This is one of the unlisted companies from this volume. 
The company mined bituminous steam coal in Pennsylvania since 1881. 
ROC-295 in the Coxrail database
image from eBay seller jpm8282

Is this large format book worth purchasing ?
The book was compiled for investors and in that context, absolutely. For scripophily research purposes, it depends. If you are into current American stocks, you might discover something of interest. However, the book contains only 500 profiles: a small chance to find out more about a particular type of companies you are curious about. 
TIP: regularly sells second-hand Walker's Manuals. 


Related link : Investopedia's Over-The-Counter

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Saturday, August 20, 2016

What is a share certificate, what is a stock certificate ?

Share certificates are no testimonies of charity, nor are stock certificates a special kind of inventory lists. But what are they? If you are not really into finance, you might not know what these objects stand for. 

Millar Loom share certificate issued to Lieutenant-Colonel Enrnest Richard Hope Torin
The Millar Loom Company Limited
Share certificate for 100 shares of £1, printed by Howard and Jones, London
double-click image to enlarge
The Millar Loom Co Ltd was formed to buy patents for a new type of loom.
This particular share issued in 1898 mentions that Lieutenant-Colonel Ernest Richard Hope Torin
is the Registered Proprietor of the certificate. From 1874 to 1884 he served 
with the 13th Hussars cavalry (Baden-Powell) in India and Afghanistan . 
You can see Torin's picture here

Both terms, share certificate and stock certificate, mean the same. They are synonyms. The former is more widely used in Commonwealth of Nations countries (e.g. UK, Canada, Australia, India), the latter is preferred in the US. The word stock refers to the capital stock of a company.

Here are the terms in some other languages :
aandeel , action, actie, Aktie, részvény, azione, acción, ação, osake, acțiune, hlutabréf, hisse senedi, aktiebrev, АКЦИЯ, АКЦIA, μετοχή, תעודת מניה, शेयर, 股權證書, 株券, 주권 , شهادة الأسهم
Just like in English, probably every language has its own synonyms. In Germany we speak of Aktie and Anteilschein, in France of action, part or titre, in Swedish aktie and aktiebref, in Spain acción, parte and cédula.

Art Nouveau design in the acción al portador from the Minas de Carmenes company
Minas de Cármenes Sociedad Anonima
Share of 500 Pesetas, série A, Gijon, 1903
A bearer share certificate, in Spanish:acción al portador, 
is issued without mentioning the shareholder's name. 
The lower half of the certificate shows 32 dividend coupons.

Ownership in a company
In order to explain what these certificates are, I must tell you first about companies. Suppose you want to start a business. Then you will need an amount of money to get your business up and running. You likely will have to lease or invest in business assets, pay for work or services, buy consumer goods, and lots of other things.
But your financial resources may not be sufficient; or, you might want to share the investment risk with others. These are the main reasons why you form a joint-stock company. In that case, you allow others to participate when they co-invest in your company. In return they receive share certificates in your company in proportion to the amount invested. So, a share certificate represents ownership in a company.

Stichtersaandeel in  Ypersche Weverij - Le Textile Yprois uit Ieper
Ypersche Weverij Naamloze Vennootschap
Le Textile Yprois Société Anonyme
English : Ypres Textile Company
Registered founder's share, 1924
Registered shares mention the name of the shareholder,  
which is also recorded in the company's shareholders register.
It is an effective method for the company to stay informed 
about its shareholders.

Physical papers
A share certificate is a piece of paper that mentions the name of the company, the number of shares owned, the date of issue and an identification number. To avoid forgery, their designs contain a number of security features such as legal signatures of company officers, corporate seals, water marks, engine turned designs, etc.
Share certificates were created decades and even centuries ago. The lucky ones that have survived such a long, often remarkable journey through time are now residing comfortable with other companions in a collection or even a museum. Now, share certificates have mostly been replaced by electronic accounts in today's financial networks.

Tagalsch Prauwenveer stock certificate mentions ownership transfers on rear
NV Tagalsch  Prauwenveer
Registered share of 600 Gulden, Batavia (Jakarta), 1902
The company operated a proa ferry and ship unloading service
 at Tegal at the north coast of Central Java. 
The rear side (right image) tells us that the share 
was transferred to a new owner in 1920 and later in 1938. 
double-click image to enlarge

Being a shareholder
Shareholders are only liable for the company's debts to the value of their shares. This concept of limited liability is one of the success factors of this type of business organization. Shareholders have voting rights at the company's shareholder meetings. And they can expect to receive a proportional share in the company's profits. When the company dissolves, they receive a proportional share of the liquidation proceeds.

Bearer share (Inhaber) from the Walther Electronic Aktiengesellschaft, Germany
Walther Electronic Aktiengesellschaft
1 Share of 50 DM, issued Gerstetten 1979, with corresponding dividend coupon sheet
This company originates from 1886 when it started manufacturing tools and guns. 
In the 1970s Walther produced electronic calculators and text processors.
Many German shares are bearer shares stating that Der Inhaber dieser Aktie 
ist bei der Aktiengesellschaft nach Massgabe der Satzung als Aktionär beteiligt,
which means that the owner (Inhaber) of this share is a shareholder 
of the company in accordance with the company's rules. 

Registered versus Bearer 
When the name of the shareholder is registered in the company's share register, the issued certificate will state his/her name and therefore is called a registered certificate. When it is sold, the name of its owner will be replaced in the company's share register. Either a new share will be issued for the new owner and the old certificate will be cancelled, or the name of the previous owner will be overwritten on the certificate, and a statement of ownership transfer is written on the rear.
Bearer shares, on the other hand, do not mention the owner's name. These are owned by an anonymous "bearer". Such shares can be sold to another party without the knowledge of the company. Bearer certificates have been popular because they were easy to sell (without transfer taxes).

registered stock certificate from the Chicago, Burlington and Quincy Railroad Company, dated 1903
Chicago, Burlington and Quincy Railroad Company
Stock certificate for 100 shares issued in 1903 to Henry Clews & Co.
Almost all American stock certificates are "registered" and state that 
shares are transferable only on the books of the company in person or by attorney...

A company usually distributes a fraction of its profits among its shareholders. A certain amount for each share will then be allocated. The income received from the ownership of shares is called a dividend.

  • In case of a registered share certificate, only the officially registered shareholder receives dividend payments. Dividend payments were often written on the rear side of the certificate. 
  • Bearer certificates have a sheet of dividend coupons. In return for a clipped coupon, a shareholder receives a dividend payment. By counting the number of missing coupons, one can tell how many dividends have been paid out.

Vereenigde Oost-Indische Compagnie (VOC)
In 2010 Ruben Schalk, history student at the Universiteit Utrecht, 
discovered the so far oldest share in the world in the Westfries Archief in Hoorn. 
The certificate dates from September 9th, 1606. 
The second page records the payments of dividend.
Source: Wikipedia.

Amazing, exotic and even weird species
The world of share certificates would certainly have interested Alexander von Humboldt whose work on botanical geography laid the foundation for the field of biogeography. As centuries passed, share certificates adapted to new political, economical and regional conditions and evolved into several types (founding shares, preference shares, et cetera) and local varieties. 
Do they teach scripogeography at Oxford ?

25 shares of 4 Egyptian pounds in the Stationery Industries company from Alexandria

Stationery Industries (Société Anonyme Egyptienne)
Titre Nominatif de 25 Actions de L.E.4
English: Registered certificate for 25 shares of 4 Egyptian Pounds
Alexandria, 1956
This "hybrid" share certificate has some bizarre characteristics. 
a) It is a registered certificate, yet there is a dividend coupon sheet attached 
(partly visible in the upper image). 
b) Although it is a registered certificate, the name of the registered shareholder is not mentioned.
Was this an error in the print design?
c) Even though the first owner is unmentioned,  we see on the rear side 
dates (date de la cession) and names of new owners for two share transfers (lower image).


Related links

PS 😉 : Who is in 2016 the most known person in the world ? Tip: it is a shareholder.

Trump Hotels & Casino Resorts, Inc.
This certificate looks like and is produced in the same way as a share certificate, but it isn't one. 
It is a specimen certificate. More about specimens in Euratom specimen or proof ?
Image courtesy :