Companies That Issue Paper Stock Certificates Pros and Cons

Companies that issue paper stock certificates offer a tangible way to own shares of a company. This unique approach is still used by some companies.

Some companies, like J.P. Morgan, issue paper stock certificates for select stockholders. This is a rare practice in today's digital age.

Investors who prefer a more traditional and hands-on approach to stock ownership might appreciate paper stock certificates. However, this method also comes with its own set of drawbacks.

Stock certificates are a document that proves ownership of shares in a company. They are used to distribute shares to founders, cofounders, employees, and investors.

There are three types of stock certificates: paper stock certificates, electronic stock certificates, and uncertificated shares. Paper stock certificates feature a corporate seal and important signatures to prevent replication.

Most companies have moved away from issuing paper stock certificates and opted for issuing uncertificated shares. Uncertificated shares are easier to manage and a more cost-effective option for distributing and managing ownership and shares.

Companies issue stock to distribute shares to founders, cofounders, employees, and investors, providing proof of ownership.

Stock certificates help identify who has ownership in a startup and how many shares each person owns. There are three types of stock certificates: paper stock certificates, electronic stock certificates, and uncertificated shares.

Paper stock certificates are intricately designed and feature a corporate seal and important signatures, making them difficult to replicate.

Companies have largely moved away from paper stock certificates and opted for uncertificated shares, which are easier to manage and more cost-effective.

Uncertificated shares eliminate the need for a paper or electronic certificate to show ownership in a company as a shareholder, making them a popular choice.

Paper stock certificates have been the norm for a long time, but they come with several drawbacks. Some private companies still use them, and some investors prefer them over electronic stock certificates.

Here are some of the main cons of paper stock certificates:

If you find an old stock certificate, it's possible it has some value beyond wall art. They may retain some value as shares of the underlying company.

Check if the issuer is still in business by looking for the state in which the company was incorporated and the CUSIP number on the certificate. This information can be found on the certificate itself.

Contact the office of the secretary of state in that state to see if the company still does business there. If so, you can call the company directly to get the transfer agent's contact information.

To cash in the stock, you'll need to fill out the transfer form on the back of the certificate and have it notarized. This is a crucial step in the process.

Once complete, send the notarized certificate to the transfer agent, who will register the stock to you as owner. At that point, you can sell the stock through the transfer agent or via a stockbroker.

Issuing paper stock certificates to shareholders is a practice that's slowly becoming outdated. Many public companies have abandoned paper certificates in favor of the DRS system, but some private companies still hold on to them.

Some investors still demand paper certificates due to their perceived credibility compared to company ledgers. However, this comes with its own set of challenges.

Paper stock certificates are difficult to track and manage, especially when multiple share transfers occur over time. They can also be transferred to new owners without the company's knowledge.

Here are some of the glaring limitations of paper stock certificates:

In fact, paper stock certificates can be stolen or lost, and they're also prone to irreparable damage. This can render them unusable and unable to trade the shares for compensation.

Auditing stock certificates can be a challenge, especially when they're not tracked properly. And, paper stock certificates can be transferred without the company's knowledge, making it difficult to keep track of ownership.