If you've found or inherited a stock certificate and aren't sure what to do, you aren't alone. They are not as easy to buy and sell as electronic stocks, and an investor might not even be able to cash them in, if for example, the company has long since closed.
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.
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 is worth cashing in on.
- If you find an old certificate, it's important to know where to start looking.
- Look for the company name and location of incorporation, a CUSIP number, and the name of the person with whom the security is registered.
- If you have been successful in finding all this information, you will need to locate the name of the transfer agent.
- Another option is to contact discount brokerages and see if they will honor the certificate.
Old Stock Certificates: Lost Treasure?
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.
- Company Name: 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.
- CUSIP Number: 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: 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.
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 in 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 investigative 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 RM Smythe. Stock search companies may also publish or help you find stock guides to assist you in investigating an old stock. However, it is often the case that the company will charge you more than the stock is actually worth.
(For related reading, see: I Lost My Share Certificate. Do I Still Own the Stock? and Paper Stock Certificates Are Gone With the Winds of Change)