Conveyance or Transfer

The oldest share certificate in the world is a sheet of paper in a regional archive in Hoorn, in the north of the Netherlands. It was issued by the Enkhuizen chamber of the Dutch East India Company on 9 September 1606 to a local man named Pieter Harmensz, and it was found in 2010 by Ruben Schalk, a history student at Utrecht who was working on his master's thesis and was not looking for it.

There is a complication, and it is the interesting part. The date on the document is the day Harmensz paid the last instalment of the 150 guilders he had promised. Strictly speaking, the oldest share in the world is a receipt.

What was being sold

The company had been chartered on 20 March 1602 by the States General of the Dutch Republic, which granted it the sole right to sail east of the Cape of Good Hope or through the Straits of Magellan for twenty one years, along with the power to make treaties, build forts and appoint judicial officers. It was closer to a semi-public administration than a firm.

The way it raised money was the new thing. Article 10 of the charter said that all the residents of these lands could buy shares in the company. Article 11 said posters would go up announcing it. There was no minimum and no maximum. In Amsterdam, which had no offices yet, subscribers went to the private house of the merchant Dirck van Os through the month of August, where the directors took turns watching the bookkeeper enter names in a ledger.

The founding directors put in 12,000 guilders each, which at the time would buy six unpretentious houses on a canal. The second to last subscription in the Amsterdam book was a hundred guilders from Neeltgen Cornelis, Van Os's maid, who had watched investors come and go all month and whose wages were under fifty cents a day. The very last entry was made by the bookkeeper, Barent Lampe, on behalf of his own servant. When the book closed on 31 August 1602, 1,143 people had signed it.

The sentence

Money put into the company was not coming back for a decade. The charter provided that a general balance would be drawn up after ten years, in 1612, at which point investors could ask for their money.

Somewhere between March and August somebody realised that ten years was a long time to ask of a stranger, and a provision was added to the first page of the subscription ledger. Conveyance or transfer, it said, may be done through the bookkeeper of this chamber.

That is the whole invention. The procedure was set out underneath it: the shareholder presents himself to the bookkeeper of his chamber, two directors approve the transfer, and the bookkeeper makes accurate notes of it in a special register. Shares had existed before. What had not was an official document saying in plain terms that you could sell yours, and here is how.

Everything that followed came out of that. If a holding can be transferred, it has a price. If it has a price, the price moves. If the price moves, somebody will try to move it.

Six years

Isaac le Maire was one of the company's founders. He came from Tournai, was rich, and resigned from the board on 22 February 1605 after a dispute about money, signing an undertaking never again to be involved in any enterprise trading beyond the Cape or the Straits. He spent the rest of his life working against the company he had helped to start.

In 1608 he formed a syndicate with nine other men, including Hans Bouwer, Cornelis Ackersloot and Willem Brasser, and began selling VOC shares for delivery at a future date. They did not own the shares. They were relying on the price being lower when the contracts came due.

They used forward contracts, which merchants already knew from the grain trade, because these were far easier than borrowing actual shares from actual holders. A forward needed nothing but a written agreement. No share changed hands, no money was paid at signing, and it was not customary to ask for collateral. The contract was written out twice on one sheet with three large letters between the copies, and the sheet was cut through the letters, so that only the two original halves would fit back together.

Then they helped the price along with rumours about the company's condition. Le Maire used a syndicate rather than acting alone because everyone in Amsterdam knew about his quarrel with the directors and would have discounted anything he said. It worked. The price fell, and each time it fell they sold more forward at the new lower price.

The first rule

The directors found out and petitioned the authorities. They wrote that they had discovered that vile practices were being employed in the buying and selling of shares, described exactly what was being done without naming anybody, and said the whole thing was very disadvantageous to the investors and particularly the many widows and orphans.

Very few widows and orphans were living off VOC shares. The argument worked anyway. Counter-petitions from anonymous shareholders, who pointed out that the price might be falling because the company was badly run, got nowhere.

On 27 February 1610, a month after the last petition, an edict was promulgated banning what Le Maire had been doing. It is the first piece of stock market regulation in the history of the world. What it banned was blank selling, as the Dutch called it: selling shares forward when your account in the company's register was empty. Borrowing a real share from a real holder and selling that was still allowed.

It did not work either. The ban was reissued in 1623 and several times after that, which tells you how closely it was observed. Its main practical effect was that traders started adding a clause to every forward contract in which both parties declared that they knew perfectly well what the rules on forward trading said and had explicitly decided to take no notice of them, and would go only to the Amsterdam aldermen's court over any dispute.

The raid failed on its own terms as well. Once the syndicate was known, the price stopped falling, and the company blocked Le Maire's account in the share register so that he could not buy shares to settle his contracts. He moved forty kilometres north to Egmond aan den Hoef, where the notaries and bailiffs would have to work harder to find him.

He kept going. In 1614 he founded a rival company at Hoorn to look for a route to Asia the monopoly did not cover, and the expedition his son Jacob led in 1615 found one, round the bottom of South America past a strait and a cape that still carry the two names. The Dutch courts ruled against them anyway.

Le Maire died on 20 September 1624. His gravestone records that in thirty years of trading abroad he lost one and a half million guilders, and kept his honour.

Sources

• Lodewijk Petram, "The world's first IPO" (the charter of 20 March 1602 and article 10 inviting all residents to buy shares; the absence of any minimum or maximum subscription; subscriptions taken at Dirck van Os's house through August 1602; the twenty one year term and the provision for a general balance after ten years; the added provision on the first page of the subscription ledger that conveyance or transfer may be done through the bookkeeper of the chamber, with the procedure of two directors approving and the bookkeeper keeping accurate notes; the directors subscribing 12,000 guilders each; Neeltgen Cornelis's hundred guilders and her wages; Barent Lampe's entry for his servant; and the close of subscriptions on 31 August 1602 with 1,143 investors).
• Lodewijk Petram, "Going short in 1608" (Le Maire's origins in Tournai, his resignation on 22 February 1605 and the undertaking he signed; the syndicate of ten and its members; the use of forward contracts, the absence of collateral and the cut chirograph; the rumours and the falling price; the directors' petitions and their language about vile practices and widows and orphans; the edict of 27 February 1610 banning blank selling and its status as the first stock market regulation; the reissues from 1623; the renunciation clause traders added to contracts; the blocking of Le Maire's account; his move to Egmond aan den Hoef; the Australian Company of 1614 and his son's voyage; and his death on 20 September 1624 and the inscription on his gravestone).
• Guinness World Records, "Oldest share certificate" (the certificate issued by the Enkhuizen chamber on 9 September 1606 to Pieter Harmensz; its discovery in 2010 by Ruben Schalk of Utrecht University while researching a master's thesis; its location in the Enkhuizen city archives held at the Westfries Archief in Hoorn; the date marking the final instalment of a 150 guilder investment, which makes the document a quittance; and the previous record holder dated 27 September 1606).
• University of Massachusetts Dartmouth, "The VOC, the Dutch East India Company, 1602-1799" (the chamber structure; the requirement that capital stay with the company for ten years, creating a permanent working fund; and shareholders selling their holdings instead).
• Westfries Archief, "VOC share of 9 September 1606" (the document itself, the printed text of the Enkhuizen chamber's certificate and the column of dated entries and sums kept against it for decades afterwards).