The word in question is scripophily! The word results from combining the English word "scrip" (representing an ownership right) and the Greek word "philos", meaning to love. So what does it mean? It is simply the collecting of cancelled or defunct old stock, bonds, and share certificates. This slightly unusual hobby began to gather speed in the 1970s. The main source of old certificates for collecting is generally the period between 1800 and 1940.
The vast majority of bonds and shares collected by scripophilists are in one sense or another 'defunct'. There are various ways in which they become available to collectors. The older certificates for example might arise where Governments in many parts of the world have reneged on their bond obligations, usually due to a change in government after a revolution, or because they lost a war.
More recently companies going into a merger, or simply into liquidation, would render the certificates themselves worthless. These could then take on a value of their own - but for enthusiasts only!
The value of old share certificates is based on a number of factors, including; the condition of the certificate itself, its historical significance, signatures (such as an original J P Morgan or John Rockefeller), rarity, and demand for the item.
In addition, the design and images used on many early share certificates are appealing to collectors.
In order to prevent counterfeiting, many early certificates were derived from elaborately engraved vignettes, which depicted the industry in question. Bearing in mind that many of these certificates pre-date the advent of the photograph, they actually take on a historical importance as visual representations of that era.
In the US there is an ever growing demand as the certificates are physical evidence which chart the progress of the Industrial Revolution – railroad construction in the 1830s; the mining boom and telegraphy in the 1850s; the oil boom in the 1870s; and the development of aviation and automobiles around 1900.
In the UK and Europe, plantations of the once powerful Commonwealth, brewing and tobacco stocks and the growth of the textile industry all provide further examples of historically important collectibles.
More recently the dot.com boom (and bust) together with some high profile corporate casualties, could provide some fine examples of corporate history in the future.
The advent of electronic trading has led certain countries to conclude that in order to expedite settlement of trades, share certificates are no longer required. The industry has long realised that there are inefficiencies with this system and a working party was formed some time ago in the UK to debate the whole issue of compulsory dematerialisation. This was driven by two factors – firstly the draft of the new Companies Act by the DTI, and secondly the European Securities Forum which had dematerialisation across the EU as a priority on its agenda, believing that by concentrating first on the UK, the rest of Europe would follow. As and when the inevitable happens and share certificates are no longer issued, scripophily will enter its next phase of potentially moving from hobby status to actually providing investment opportunities.
In conclusion the market itself in old share certificates has a promising future. In the meantime, if the reader happens to have any old share certificates lying around which he or she thought were no longer of value, the chances are ever increasing that there may just be a buyer out there for them.
If you’d like to read more free research, comment and analysis from me and the rest of my colleagues at Hargreaves Lansdown please visit our website at www.hargreaveslansdown.co.uk
Richard J Hunter
Head of UK Equities
Hargreaves Lansdown
www.hargreaveslansdown.co.uk