The First Company to Issue Stock
The Dutch East India Co. holds the distinction of being the first company to offer equity shares of its business to the public, effectively conducting the world's first initial public offering (IPO). It also played an integral role in modern history's first stock market crash.
Often referred to by the acronym VOC, short for its Dutch name Vereenigde Oost-Indische Compagnie, the company was formed in 1602 by the States General of the United Netherlands, granting a 20-year monopoly on trade with the East Indies, plus sovereign rights in any newly discovered territories. Founded in 1602, along with the creation of the Dutch East India Company (VOC), the Amsterdam Stock Exchange is considered the oldest, still-functioning stock exchange in the world.
- The Dutch East India Co. is widely thought to be the first company to allow the public to invest in its business, in what was the world's earliest initial public offering (IPO).
- Commonly known as "VOC," for its Dutch name Vereenigde Oost-Indische Compagnie, the spice company thrived mainly due to its monopolistic hold over the East Indies.
- Investors ran the risk of unprofitable voyages due to unpredictable spice supplies.
Understanding the First Company to Issue Stock
The Dutch East India Company was one of the earliest businesses to compete for the exports from the spice and slave trade. It was a joint-stock company and would offer shares to investors who would bankroll the voyages. Financiers required a safe and regulated place where buy and sell shares of these early global enterprises.
Because it was granted a charter from the Dutch governing body, it was bestowed with incredible powers that were enjoyed by a small collection of merchant ships that formerly competed with one another in the spice market. These merchants would later form limited liability companies, with which investors would fund voyages in return for a percentage of the profits. But these investments were speculative due to the unpredictability of the spice supply, and there was consequently no guarantee that any given voyage would generate profits.
The first formal exchange is commonly thought to be the commodities exchange established in 1531 in Antwerp, Germany, where traders exchanged promissory notes and commodities.
For example, when two ships arrived simultaneously, a supply glut occurred, which depressed prices, thus eroding profits for both merchants and investors. Competition and corruption eventually eroded VOC's monopolistic hold, and the VOC was formally dissolved around 1800.
Once the charter was locked in place, VOC merchants issued permanent shares in an ongoing enterprise whenever they required additional capital to outfit a proper fleet. VOC also issued bonds to generate further investments, which it used to fund individual voyages, effectively becoming the first multinational interest when it set up headquarters in Asia.
The Dutch East Indies Company, while shuttered in the late 1700s, was the driving force behind and paved the road for Dutch imperialism during the 1800s.
Reportedly, in 1634 VOC ships carrying tulip bulbs helped contribute to a supposed stock market crash later referred to as Tulipmania. From 1679 to 1772, the company paid a regular dividend that yielded between 12% and 40%. In fact, the VOC continued to exist and operate in one form or another until the end of the 18th century.
What Was the First Ever Stock?
The Dutch East India Company issued the first recorded stock certificate on the Amsterdam Stock Exchange.
Was the Dutch East India Company Dutch or English?
The Dutch East India Company (EIC) was created by the States General in 1602. The East India Company was an English company established two years before the Dutch EIC.
What Did the Dutch East India Company Do?
The Dutch East India Company was established to take advantage of trade opportunities in the "East Indies." The charter authorized the company to appoint governors and judicial officers and raise armed forces in the countries they traded in to facilitate profitable trading.
Correction—June 30, 2022: A previous version of this article misstated the entity that established the Dutch East India Company.