A New Facebook Derivative Trade: the Stock Certificate
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Facebook is making stock certificates available to investors who request them. Here is what the company says its certificate may look like.
Note that Mark Zuckerberg's signature lists him as President, a title we haven't seen before at the company. Facebook tells our Julia Boorstin that Zuckerberg’s title do, in fact, include President, along with Chairman and CEO.
"It's a fairly plain certificate," says Bob Kerstein, CEO of Scripophily.com, which trades stock certificates. "There's a lot of interest in it because of the notoriety of Facebook and the fact that it has Mark Zuckerberg's name on it."
Kerstein says a lot of companies no longer offer stock certificates — Apple, Microsoft, GM,Cisco. That can make the remaining pieces of paper more valuable. For example, among the Apple stock certificates Kerstein has bought is one from the IPO. Shares back then, adjusted for splits, were $2.75. He just sold the certificate for $1,300, more than twice what the stock is currently trading at.
How can he buy and sell stock certificates when they represent active securities? Does he need a broker’s license? No. The SEC has issued a "no action" letter which allows Kerstein and others to do this under certain conditions:
- The stock certificate is stamped "non-redeemable" and "non-transferable".
- The certificate is sold for at least twice the value of the current share price.
- The seller makes it clear he/she is not a broker/dealer and the certificate is not being sold for investment purposes.
Kerstein tries to buy certificates only for single shares. "You don't get any more credit by having a multiple number of shares...so you might as well only pay for one."
He says you can purchase single shares on sites like Give a Share.com, which charges $39 above the stock price to buy the certificate. But most of Kerstein’s biggest profits come from selling certificates for companies that are no longer in existence or have been acquired.
Take Pixar, which was purchased by Disney in 2006 for $60 a share. "We sell Pixar certificates now on our website for $600 for two reasons: one, it's a gorgeous certificate, has all the Pixar characters on the certificate, and, plus, the chairman of the company at the time was Steve Jobs."
Lehman Bros. stock certificates are also popular. "They're really hard to get, and those are worth about $400 to $500 dollars now." One company where the certificates have not traded as well as he expected is AIG. "I bought them before the reverse split, and they've done OK, but I thought they would've been a lot more popular."
