Editor's Note: Ask TheStreet is designed to answer questions about the market, terms, strategies and investment methods. Please email us to ask a question, but keep in mind that we cannot offer specific investment- or stock-related advice.
Do companies still issue stock certificates? I rarely hear about them anymore. Thanks, J.B.
Don't worry, it's not your hearing that's the problem. It's just that stock certificates are quickly becoming a thing of the past, and soon will only be found hanging in people's offices.
As a result of legislation designed to foster corporate cost-cutting, only a handful of the 50 U.S. states still require public companies to issue physical certificates. Stock brokerage firms and many of the issuing companies enthusiastically support this effort, which is known as "dematerialization."
The move toward dematerialization seems to be just fine with most investors, who would rather use book-entry stock ownership, where the issuers record all details of ownership electronically. It is more convenient than locking stock certificates away in safe-deposit boxes.
According to the Securities Industry Association, book-entry ownership can be accomplished by having the securities held in the investor's account at the broker-dealer, a method known as putting it in "street name." Another alternative is the use of the Direct Registration System, where investors can have their positions electronically recorded by the issuer or at their transfer agent.
became the first company in the United States to do away with paper certificates. Investors now receive a computer-generated report showing them how many shares they have outstanding.
For the few investors who still prefer holding their shares in physical form, it can be a very expensive proposition, says Bob Kerstein, founder of
Scripophily.com. Scripophily is the hobby of collecting stock and bond certificates.
To go through a stock broker, says Kerstein, you will have to pay the trading price of the stock, plus the commission the broker charges, plus a stock-issuance fee. Depending on whom you use as a stock broker, the commissions can be anywhere from $15 to $50, and the stock-issuance fee can be anywhere from $50 to $100 per certificate.
"Due to the high cost of processing, risk of loss of certificates, handling costs, so on, it is clear the trend is toward the elimination of the paper stock certificate," says Kerstein.
That is certainly helping Kerstein's business. While the supply of new certificates reaching the collector market is dwindling, the hobby of scripophily continues to grow.
"Over the years, there have been millions of companies which needed to raise money for their businesses," says Kerstein. "And each company had their own story as to how they did it. These certificates give us a piece of that story."
Like classic baseball cards or antique stamps, there are many factors that determine the value of a stock certificate, including condition, age, historical significance, signatures, rarity and the type of engraving process.
Despite the move toward electronic ownership, one company that may continue printing stock certificates is
. The Disney stock certificate features Walt Disney himself surrounded by his classic characters, and is a popular gift for collectors and noncollectors alike.
Framed single shares of Disney are available for purchase on sites like
Oneshare.com. The price fluctuates, of course, with the price of the stock itself.