A New Facebook Derivative Trade: the Stock Certificate

Source: Scripophily.com

Martha Stewart Stock Certificate

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 Boorstinthat 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.

Source: Scripophily.com

Apple Stock Certificate

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."

Source: Scripophily.com

Pixar stock certificate

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."

Source: Scripophily.com

Lehman Brothers stock certificate

Not only does he sell stock certificates, Kerstein also collects old Greek bonds. "Unlike the Greek bonds that are being traded on the market, our Greek bonds are worth the paper they're printed on."

Will the Facebook stock certificate appreciate more than the stock itself?

One thing that could make the paper valuable is if Mark Zuckerberg leaves the company.

"Martha Stewart Living certificates that have her name as chairman were very valuable, they sell from about $100 to $150," he says. "But when they started issuing certificates without her name on it, because she was removed from the company as an officer, the certificates went down in value."

As for whether it’s preferable to own Facebook stock or the stock certificate, Kerstein pauses and says, "I would buy them both."