Have you ever found or inherited a stock certificate for a company? What if you've never heard of the company? We'll go over how you can find out whether you were left a fortune waiting to be claimed, or just a piece of paper ready for the recycling bin.
Stocks in Physical Form
Happening upon old stock certificates is actually pretty common. In the past, investors received physical certificates, referred to as in bearer form, when they bought stock. The problem of old stock certificates doesn't arise very often anymore because most stocks are kept in electronic form in your broker's computer system, which is known as in street name.
So, if you find an old certificate, it's important to know where to start looking to see if your discovery is merely wallpaper from a bankrupt company or a lost treasure. Rather than throwing away the piece of paper that might be your lottery ticket, take some time to do the research.
The Key Pieces of Information
Start by looking at a few things on the certificate. Look for the company name and location of incorporation, a CUSIP number, and the name of the person with whom the security is registered. All of these items are important and can likely be found on the certificate's face.
Old Stock Certificates: Lost Treasure?
If the company still exists, your search ends here. You can go to the library or use the internet to find out exactly what has happened to the company. Yahoo Finance has a good symbol lookup tool where you can search the name of the company for its ticker. The problem is the name may not be the same. Unless your company is a household name, like General Electric, chances are, at some point, the company either was bought out or changed its name due to a merger.
This number provides a vital piece of information for searching out a security; it's like stock DNA. Each security has a unique number, and changes and splits are recorded accordingly. That is, every time a security changes its name, splits or does anything affecting its stock certificate, a new number is assigned to it. By doing a search starting from the original number, we can find out the security's current equivalent. Outside North America, other numbering systems such as SEDOL or ISIN are used.
Most large discount brokerages are able to help clients track down securities that have been defunct for over 10 years. With the CUSIP number, the brokerage can uncover all splits, reorganizations and name changes that have occurred throughout the company's history. It can also tell you whether the company is still trading or out of business.
Location of Incorporation
Should the previous two methods of searching for a company not pan out, the location of incorporation provides you with a last resort. Each stock is incorporated in a state, and the records are kept at a central location. Generally, incorporation goes through the Secretary of State, and the name of the business will be documented in those databases. You should be able to contact the Secretary of State's office and find out more about your certificate. A fee is usually charged for this service.
If you have been successful in finding all this information, you will need to locate the name of the transfer agent. The easiest way is to contact the company and ask it directly. You can usually find the number of the company or the name of the transfer agent on the company's website. Generally, publicly listed corporations have an investor-relations link on their sites.
The main reason you need to go to a transfer agent is companies rarely handle their own securities in-house. They prefer to have another company take care of the bookkeeping and issuing of securities. The transfer agent will have a record of the person's name on the stock certificate; ownership can then be transferred to your name. This can be done many different ways, so it's always best to contact the transfer agent and request instructions. Many of them are extremely picky.
If the company is no longer public, your search ends. In this case, there may be some legal repercussions, and you will need to speak to a lawyer. If the company has in fact changed names, merged, split, reversed split, reorganized, restructured or undergone any combination of these, you might have something to work with.
The Importance of Documentation
If you are inheriting securities, ensure the individual whose name is on the certificate has bequeathed it to you. A probated will with the necessary signatures of the executors may be required by the transfer agent before it will transfer ownership.
Once the certificates have been delivered back to you in your name, you can deposit them with a broker and sell them accordingly.
Have Someone Else Do the Work for You
For those of you who have gone through all of these steps without any success, there are other means by which you can have your old stock certificates researched, but they will cost you some money.
For a fee, stock search companies will do all of the investigation work for you and, if the certificate ends up having no trading value, they may offer to purchase it for a collector's value. One company that offers this service is R.M. Smythe. Stock search companies may also publish or help you find stock guides to assist you in investigating an old stock.
(For further reading, see: How do you get a hard copy of a stock certificate?)