Stock Certificates Can Be Valuable Even If Companies Are Defunct

IF you're one of those folks who have old stock or bond certificates around the house - perhaps inherited from a relative - you may be sitting on hidden treasure.

That certificate may be valuable if the company, or its successor, is still paying out earnings and dividends. And even if the firm has gone out of business, the certificate might be worth cash as a collectible - part of a growing hobby called "scripophily," the collection of historical and financial documents.

Some old engraved certificates turn out to be "very rare," as well as "works of art," says Barbara Fisher-Bracco, a representative of R.M. Smythe & Co., New York, a certificate-research firm.

Late last year, for example, a family in Fredericksburg, Va., received a check for $44,000 from the State of New Jersey after research by Smythe about an old stock certificate. The company had gone private and stock-distribution money had been turned over to the state. Smythe tracked down the company - and then got the money from the state.

Moreover, some dealers believe old certificates will become even more valuable in future years, as more companies shift away from issuing actual certificates and transfer to electronic book-entry registration, similar to bank-account registration, or the bookkeeping system used by the US Treasury to record Treasury bills and bonds.

Tracking down companies

If you have a certificate, check phone books to find the company or its successor. If it's still functioning, ask the firm for its current share price. Let the firm know you own the shares. The certificate need not be old. In fact, many searches involve stock and bond certificates issued within the past 10 years.

Lyn Walsh, a certificate-sleuth, says that 1988 and 1989 are years that seem to trigger an especially "large number of requests" about defunct companies in the United States. The mid-to-late 1980s, of course, was a period of intense leveraged buyouts and corporate takeovers, when scores of publicly listed firms disappeared in the US - either through going private, or after being absorbed into other firms.

Ms. Walsh is a research associate at the National Quotation Bureau Inc., a financial-services firm in Cedar Grove, N.J. The Bureau publishes the daily "pink sheets," a listing of more than 11,000 publicly traded small companies in the US. The firm also publishes the monthly National Stock Summary, a listing of about 25,000 to 30,000 publicly owned companies. The bureau has records going back to the 1930s.

Prominent firms are usually easy to find, Ms. Walsh says. Often you can just call a broker, and ask them to check the National Stock Summary or, for smaller firms, the pink sheets. A person seeking to locate an obscure company will find the going harder, Walsh says. If the firm is not currently listed, the bureau will conduct a search for a fee, starting at $50. (The bureau's phone number is 1-800-732-7868.)

R.M. Smythe & Co. is considered the leading private search firm in the US. A search, involving a complete history of a company, costs $75. (Call l-800-622-1880.) Smythe will attempt to identify the firm's current or last-known address; where the issue is traded; the transfer (financial) agent for the firm; and whether there have been any recent cash distributions.

One especially useful self-help guide is the "Million Dollar Directory," published by Dun & Bradstreet, a financial-services firm in Parsippany, N.J. The directory, found in many libraries, lists the 160,000 largest corporations in the US. Dun & Bradstreet has an even larger database of more than 10 million companies. But more than 90 percent of those are privately held firms, says Ralph Rose, a spokesman. Dun & Bradstreet will undertake a "customized" search, with price based on the difficulty of the request. (Call 1-800-526-0651.)

Collectibles

Even if the firm is no longer making dividend payments, your certificate could still be worth money. "There's a growing collector's market" for old certificates, says Stephen Goldsmith, a Smythe representative. For example, Jan. 26-28 Smythe will host a major auction of old certificates at the Strasburg Inn, in Strasburg, Pa. Collectors and dealers will buy and sell certificates of vintage automobile, railroad, mining, and telephone and telegraph companies. The auction includes original shares of McGraw Publishing Company and Hill Publishing Company, which later merged.

The hobby is still fairly young in the US, says Gary Dietz, a dealer in Nashua, N.H. By contrast, Europeans, particularly Germans, have long been collectors of old financial records.

Mr. Dietz, who reckons that there are only about 7,000 active collectors in the US, runs a catalog service of stock and bond collectibles on the Internet, (at http://www.robinsoft.com). Prices for documents range from $20 to thousands of dollars for rare certificates such as those from the Edison Phonograph Company in the 19th century.

Someone wanting to buy or sell an old certificate should contact two or three dealers to obtain a price comparison, rather than rely on price guides sold by hobby companies, Dietz says.